Dior, Vuitton & CO: How well is luxury doing on the stock market?

Fine watches, expensive designer bags or costly accessories – luxury goods are in extremely high demand, also on the stock exchange. How investors can benefit from it.

It sounds like the slogan of a regulars’ table, but: luxury is always an option. Whether the financial crisis, corona lockdown or recession worries – the business of the well-known luxury groups continues to boom or at least recover very quickly from temporary sales losses. And if we look at the current quarterly figures or just at the queues in front of the shops on Düsseldorf’s Königsallee or Frankfurt’s Goethestrasse, it’s true even in times of extremely high inflation. Apparently savings are made elsewhere, but not in terms of luxury.

The industry is just very resilient because companies have more pricing power than others. We seem to go along with every price increase, the longing for the noble goods is too great. This leads to margins that are well above average, and the companies earn damn well, even better and better. Since 1995, the market for luxury goods has even grown twice as fast as the global gross domestic product. Above all, the demand from Asia has developed well with increasing prosperity and today often accounts for almost half of the sales of the corporations. All of this makes sales and profits soar and stock prices rise.

And strong. If you follow me on Instagram or Facebook, you might have noticed that I partied a bit a few weeks ago. And a premiere: My first 1,000 percent share! Yes, I really do have a share in my portfolio that is now up a little more than 1,000 percent. And it’s not a gambler’s stock, not a penny stock, but the stock of a rock-solid luxury group, namely LVMH. The best-known brands of the French group include Louis Vuitton and Christian Dior, but also Moët, TAG Heuer, Fendi and Kenzo. You will surely notice: pure luxury.

But back to my favorite share and my luxury problem: If a share rises like this, then you have a pretty big imbalance in your portfolio – experts call this cluster risk. Actually, that’s exactly what we should avoid. Now, as you know, I invest my long-term portfolio in broadly diversified ETFs. But in my play money depot it can also be individual titles. And that’s how LVMH stock ended up there, albeit almost 20 years ago. At that time I was still on the road without a strategy, if I’m honest. But in the case of LVMH I had a good nose, in other cases, such as Wirecard, less so. But that’s another topic.

I now have a very clear strategy and two portfolios: the play money depot is for short to medium-term investments, the large depot for long-term asset accumulation, retirement provision. But if a share goes off like this, firstly the play money depot becomes a bit too “big” and secondly there is the cluster risk mentioned. My favorite share now accounts for 50 percent of the play money depot. This is actually only one thing: extremely risky.

Actually, I should take countermeasures, take a few profits, spread the risk more widely – do everything that I advise you to do here every two weeks. If it just could be that easy! But it isn’t, because I’ve fallen in love with LVMH stock. An old stock market wisdom says that you shouldn’t do exactly that, i.e. fall in love with a share. But you know how it is with feelings … also on the stock market! I would never break up. I’m in love. Cluster risk or not.

Luckily, business at LVMH is going very well – as is the case with its competitors, by the way. I keep getting asked if I should get on now? Everyone has to decide for themselves, I do not make any recommendations for individual stocks. But I can only warn you about the single stock risk. “Luxury is always possible” is not guaranteed, it is not true at all times, and of course there are setbacks on the stock market in this sector too. Luxury stocks are also highly valued, they are expensive. Luxury also has its price on the stock exchange.

If you also want a bit of luxury in the depot, then you can of course take a closer look at the shares of the relevant companies. There are quite a few of them: In addition to LVMH, there are, for example, Burberry, Hermès, Tiffany, Dior, Prada and Kering – you are spoiled for choice. Alternatively, you can also rely on actively managed luxury goods funds such as the Pictet Premium Brands (ISIN: LU0217138485) or the GAM Multistock Luxury Brands (ISIN: LU0329429384). But please take a close look at the strategy. Because in the depots there are not always pure luxury stocks, but often also less luxurious but brand-oriented stocks such as Mercedes or Nike.