Luxury: Excelent Financial Investment
Buy luxury goods can be both, an expense and an investment. The luxury sector offers great opportunities in the medium term.
The luxury sector has always been associated with great wealth and the highest social strata. However, times change and so do the ways of owning a brand. So, let’s change the concept.What is more glamorous, owning a product or being a shareholder of your favourite company?
The combination of luxury and finance is rather compelling. To AFS Finance Advisors, investing in luxury means buying shares of solid companies, sometimes with a history of several centuries. It means investing in a brand that distinguishes itself from its competitors, a brand that transmits uniqueness.
By fundamental analysis, the sector is in a league of its own, where concerns are different from the rest. It is a steady market? with high margins and strong cash generation that has little to finance growth via credit. Possible mergers & acquisitons open perspectives on price appreciation within the sector. The sales of luxury companies seem more crisis resistant than those of most sectors. Albeit volatile during periods of economic crisis, stocks of the luxury sector tend to do very well in bullish environment.
From a social perspective, we believe that the luxury sector is closely related to tourism, technological advances, the aging population in the developed economies and the rising of the middle class in Africa and Asia, among others.
Luxury tourism is spreading fast all over the planet, with Europe being one of the top destinations. In Spain in particular, it is one of the main drivers of the economy. Long established brands benefit from their trajectory and experience as demographics (age, disposable income) tend to increase demand for quality goods. Time builds reputation.
The number of HENRY’s (High Earners Not Rich Yet) is growing fast. The seemingly endless demand for luxury goods from China, be it in online or in shops, illustrates the rise of a new middle class in Asia, but also in Africa. Technology seems to thrive in an ever changing world. There’s good chance that the Apple Watch has just entered the sector.
At AFS Finance Advisors, we have identified the luxury sector as one of the megatrends. It is characterized by a compelling dynamism, a differentiating factor and the time-tested resilience of the companies that compose it. We believe that the sector offers considerable potential for individuals ready to invest in brands that, as a consumer, they have been familiar with for a long time.
Disclosure: The author is not responsible for the views expressed in the article. The text was written freely expressing ideas, without receiving any compensation. The author has no business relationship with any of the companies whose shares are listed in this article.