Analysis of Luxury Goods Sector



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LVMH – Various products include LV, Celine Moet Chandon, Fendi, Dior, Hennessey, Verve Cliquot to name a few. Very diversified products Price for price relative is on a 2 year high, although I do believe this is a very good stock I feel that it is a stock to hold until there is a dip. Hermes – mainly silks and two different types of bags. A very exclusive brand and maybe a bit too exclusive with not enough products; only caters to a very small market.

However, I find this one of the more interesting stocks out of the sector for a few reasons. In 2000, they decided to run their clothing department from China; LV increased their stake holding in the company even though Hermes asked them to release a percentage of their shares – potential buy out in the next few months. The stock however released their results recently which were above consensus and the share price rose dramatically last week.

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I personally feel that this stock is a good one to invest in but the question is simply whether or not you can get your hands on any of the free float – trading volumes are thin. Next dip I would buy in where possible. Burberry – Burberry has been an interesting stock to follow over the past year, constantly exceeding consensus expectations. Although Burberry is categorised as a luxury good, it is at the more affordable end of the sector, so the question would be, if a double dip was to come would this be a stock that would plumit purely on a demand basis.

The stock has really rallied over the past few weeks and has been justified with earnings upgrades over the year – barring bulgari looks to be the be the best performing stock in the sector, now with bulgari bought, it takes the lead. The stock however trades at a premium and with the rally I feel that it is best to hold off short term on this stock but follow with a keen eye. Richemont – Owners of Cartier, Chloe, net-a-porter, montblanc and more. Another very diversified brand but catering for a different market than LVMH I feel.

This is very much a classic brand for a particular individual starting with young professionals, people with money go to buy their products as they can afford them. None of their brands have been tarnished with fakery either, very classic looking products. The companies organic growth really has excelled and it looks like the company will continue to drive this forward with market opportunities in expanding areas such as India and Latin America. Another one to watch.

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