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Thematic Thursday: Adding luxury goods to your portfolio
Why invest in luxury?
The global luxury market is a large one, having grown revenue at a faster pace than the overall equity market over the past decade, as rising wealth and income in emerging market economies has lifted demand. The industry is more concentrated than most, but this concentration has benefits, leading to stronger pricing power and thus high operating margins. Another benefit of the luxury industry is that their customer base is less sensitive to the economic cycle, suggesting that luxury stocks could perform well, despite a more uncertain economic outlook.
Searching for quality
Saxo’s equity strategist, Peter Garnry, picks a high quality company each week to analyze. This week that company was Hermes, which exemplifies quality through its consistent revenue growth, high margins, and robust return on invested capital, underpinned by its commitment to craftsmanship, exclusivity, and strategic market positioning. You can read his full report here.
Luxury goods as a theme
If you want to find out more about the wider sector, Saxo has a “Luxury Goods” theme, which lists the largest luxury companies in the world. You can access that theme in the Saxo platform here. There's also ETFs that offer easy exposure to the sector in one investment. An example is the Amundi S&P Global Luxury UCITS ETF, comprised of 80 of the largest publicly-traded companies engaged in the production or distribution of luxury goods or the provision of luxury services that meet specific investibility requirements. You can see a list of the top 10 holdings and weightings at the time of writing below.