The largest sectoral basket in the world for luxury goods,LVMH (symbol:MC.PA) at an all-time high: The richest man in the world these days is Bernard Arnaulta French businessman, investor, art collector and the founder, chairman and CEO of LVMH Moët Hennessy Louis Vuittonthe largest luxury goods company in the world.
According to Forbes arrived Arnault For an estimated net worth of 213 billion dollars personally and more so in my family. This was true for the beginning of January 2023, for the end of January it is much more because the company’s stock, which entered 2023 at 679.9 euros, is close to 800 euros, all-time record levels. But shares LVMH under his control is only a part of his personal wealth, there is also a rare photo collection, other shares, real estate and more, “It’s all in the family”, Forbes explained, “and it will continue to be in the family” and it is true that the Wall Street Journal, in an investigative article about the tycoons who lead the luxury goods industry, recognizes this uniqueness of sector-leading families.
So today we will talk about the luxury goods industry and the investment options in it. LVMH Established in 1987 as a result of a series of mergers, which he initiated and led Bernard Arnault, of leading companies in various prestigious fields. Through 5,556 stores worldwide and the Internet network, the company sells a wide variety of wines, champagne and spirits, luxury fashion and leather products alongside cosmetics and perfumes. They manufacture and design yachts according to the customer’s order alongside luxury yachts. They own a leading media company in Europe, luxury tourism services, home design and more. In short, as Martha Stewart, the author of the American “lifestyle”, said at the time, “the society in which anyone who wants to be rich is a captive customer.”
The company controls more than 60 subsidiaries that each manage a small number of luxury brands, 75 in total. Among them are Tiffany, Christian Dior, Fendi, Sephora Bulgari And more so when the subsidiaries are managed independently. In 2022, sales reached 72.3 billion euros with operating and net profit of 19.7 and 13.3 billion euros respectively and earnings per share of 26.36 euros (10% increase compared to 2021). The current market value is about 395 billion euros, the most valuable company in Europe.
Arnault Actually built the company by adopting the strategies of 2 American luxury companies, Tiffany ((Tiffany & Co. which he purchased in 2021 and Berkshire Hathaway (NYSE:BRKA) of Van Buffett. Tiffany adopted (long before the acquisition) the method of marketing with the help of influencers, celebrities and other key opinion leaders. The use of these figures for sales promotion, which today is an integral part of every company’s strategy, was actually an “invention” of Tiffany’s, which with the help of the celebrities it recruited became almost a national asset. Warren Buffett took Arnault the method of acquiring his companies and their management.
Buffett’s success, for those who are not familiar with his modus operandi, does not stem from the successful investments he makes in leading public companies (such as Coca-Cola, American Express or Apple) but from the acquisition of companies in various fields when he leaves the management of the companies to their managers. As of early 2023, Berkshire controls more than 65 companies (which own 260 wholly owned subsidiaries) across the technology, consumer, energy, financial services and healthcare industries. Some of the companies are among the world’s leaders in their fields, such as the Israeli Iskar, the giant of paints, Benjamin Moorethe wholesale giant for supply chain services for supermarkets, McLanethe freight train giant BNSF Or the large battery manufacturer Duracell. As mentioned, Buffett allows each management team to make all the decisions for each of them, he does not even interfere in their budget preparations. Buffett chooses the companies according to the intrinsic value, the moat and especially the performance of the management over time,
That’s exactly how it works Arnault – LVMH It is actually a basket of sectors, a basket of the luxury goods and services industry and in terms of the return to the investor at that time LVMH Hits, since the beginning of the century and every year, the Dow, the Nasdaq and theP&Swhich funds or baskets that are focused on luxury products such as the basket of luxury products of the type of LUXURY (Amundi Global Luxury ) or a prestige fund like Pictet Premium Brands which includes every expensive global brand. LVMH It is a basket of luxury products that actively managed products fail to do.
The luxury goods industry: The key to the “luxury goods company” criterion is exclusivity, which is mainly maintained by the ability to price at a high price but also by consciously limiting sales volumes and points of sale. The industry includes highly exclusive personal items that convey the taste and status of their owners. This includes clothing, footwear and leather accessories, eyewear, as well as watches and jewelry and cosmetics. The industry, which in 2021 generated 294.18 billion and in 2022 312.63 billion, is expected to reach sales of 354.8 billion this year and 407 billion in 2027. The data does not reflect the entire industry because in terms of the definition the industry also includes products such as luxury cars, companies such as NIKE or luxury hotels, but these are associated with their industries. A Ferrari car for example, a luxury product, is indeed in baskets and the field funds, but not in the data published regarding the “luxury goods industry” because in this respect it is part of the automobile industry.
The largest segment of the luxury market is luxury fashion with a market volume of 111.5 billion dollars in 2023 (31.4% of the total) followed by luxury jewelry and watches, leather goods and cosmetics and perfumes. Most of the revenue (75.7 billion or 21.3% in 2023) Produced in the USA and predict that in 2023 22.4% of total revenue will be generated through online sales. Online sales jumped from 13.9% in 2019 to 18% in 2020 because of the corona and since then they have been increasing and will reach, according to estimates, 26% in 2025.
The increase in online sales has had a significant impact on the industry, which is undergoing a major “technological adjustment”. The leading companies in terms of sales are LVMH which holds 15% of the market followed by Estee Lauder (NYSE:THE), Dry (symbol:KER.PA) andLoreal (symbol:OR.PA) each with 5% of the market.
Finally, it is important to note that what characterizes and will continue to characterize the industry is the activity of mergers and acquisitions and the impact of the progress of the technology revolution that creates an extensive platform for the entry of startups.
Is it interesting to invest inLVMH? As happened and happens in almost every industrial niche, the luxury goods industry is also an oligopoly (a market structure in which a small group leads in terms of sales) which is led by LVMH And by a large margin as mentioned. The truth is that the three European companies, LVMH, DRY and- Lorealcompared to the various indices, were not significantly affected by the current amendment, LVMH (symbol:MC.PA) even touching the all-time high. Estee Lauder (NYSE:THE) on the other hand, was hit, falling by 26% from the record. Why the gap between THE For the other three? You will be surprised but the real reason is that Estee Lauder is “American” and the other three are European. It is strange that this is the reason, but it is a fact, American stocks receive, at high tide, much higher values than all-American ones and fall much more during corrections (because they rose much more). That’s how it’s worked since non-US stocks started trading in New York. THE By the way and despite the sharp drop it is still trading, even now, at a high multiple, the highest among the quartet. 26 of 31 analysts covering the LVMH Recommend in “Buy”. The five analysts reviewed this month all recommend a “buy” with a consensus target price of €862. Goldman Sachs was the last with a target price of 900 and the sentiment, as of 24.1, is completely bullish. LVMH It is a company that is managed in the best way, no less than Berkshire, whose consumption of the products it markets is very stable and which operates in a field that has been growing for years and is less affected by an economic slowdown and stock LVMH As mentioned, whether you look over 15, 5 or a year, it yielded more than the Nasdaq 500 P&S Or any luxury fund. We think that the solid investor should definitely include such a stock in the investment portfolio. at what price? This is already the personal decision of the investor.
A day that starts with sharp drops ends at zero – what does that mean?
The beginning was pessimistic – after Microsoft reported a lukewarm forecast, the headlines were black, and the markets fell. But last night’s trading on Wall Street was close to zero. Investors do not believe in scaremongering. Are they right?
Americans have a term “mind-boggling” which means, according to the Academy of Language – “exciting or decisive mentally or emotionally” but in slang it means – “you can go crazy about something” and indeed, so said yesterday, at the end of the trade, Charlie Pine, the presenter of Fox business When he examined the index curves and he is indeed right. How can one explain the gap between the behavior of the investors and the screams about an approaching economic crisis voiced by the media and a significant part of the “experts”.
According to the behavior of the stock indices and bonds, it is clear that investors are not ready to listen to screams and threats. For those who watched the trading in the first two hours and also read the headlines of the morning, it was clear that we were going to have a particularly difficult day. “Negative trends are developing at Microsoft”, screamed the headlines and many “commentators” explained that the recession is, in fact, already here and if Microsoft also lays off 12,000 employees then it seems that the 2008 crisis is just around the corner.
The CEO of Microsoft did not say that the future is bad, quite the opposite; and of course he did not enter into huge investments in artificial intelligence (AI) because it is going to be difficult. Investors are not stupid, they know that Microsoft, like all high-tech companies, certainly in Israel, have competed in recent years for hiring, They mobilized anything that moved at any price they asked for. They understand that Microsoft, like all high-tech companies, is taking advantage of the situation to “become more efficient” and so are the companies in Israel, but it’s not because it’s going to be bad and difficult.
True, Microsoft is also taking advantage of the situation and becoming more efficient because after all it is part of capitalism, but whoever listened to the CEO of the company understood that the man is not worried about the future. The crazy demands like the crazy estimates have calmed down, but there is a long way between that and a real recession.
“Tesla is in trouble…”, the “experts” have been chanting for a year. really? These are the same experts who pushed the stock into outer space and the same experts who ten years ago, five years and two years ago claimed that the company was unable to make a profit. In view of the numbers we saw last night and the incredible demand for vehicles that rises dramatically when the company lowers prices a bit, who is to believe?
And bond yields? You noticed that since the beginning of the month the yields have dropped by more than 10% to the 3.44% area. In the face of the Governor’s threats to further increase the interest rate “as much as necessary”, the investors probably think that “it won’t be necessary”.
It’s not that the shocks are over and the increases will return tomorrow morning, but this is, without a doubt, the period of time created by the “disappearing hand” of the capitalist economy (and returns as usual) for investors to collect shares of good companies at sane prices that have not been seen in years. The technology revolution is still in its infancy and the tide will continue.
Shlomo Greenberg’s full column will be published tomorrow