If we’re going with the dictionary definition of the term, a luxury item is anything non-essential that provides us with a sense of pleasure, pride, or comfort. But that definition could cover a lot of products.
In the investing world, the luxury sector is at the top end of the market. It’s the fashion houses that produce garments costing hundreds of dollars. It’s the high-end perfumers that create expensive fragrances. If it’s non-essential and costs a lot of money, it fits into the luxury category.
Investors may find that the luxury sector provides them with opportunities to make extensive returns. However, it’s not a cheap market to get into. You’re taking a bigger risk when you’re playing in the world of luxury. That’s why we’ve analysed five key stocks in this sector to give you an idea of where to invest your money.
Louis Vuitton is already one of the biggest names in fashion. The company’s special brand of Moet Hennessy has built successfully on the company’s branding to become a high-end item that is really going places.
Analysts suggest that LVMH stock is likely to experience a 44.57% increase, buoyed by the $18.7 billion in sales the company has made during this quarter. The current consensus is that this is a great stock to buy in the short and medium terms, though the general outlook for luxury goods is a little rockier in the long term thanks to America’s rising inflation and interest rates.
Compagnie Financière Richmond
An established Swiss luxury goods holding company, Compagnie Financière Richmond has been doing business since the late 1980s. The company has experienced some rocky recent times though, with its median share estimate landing at 15.57% less than its price in June 2021.
But the future looks bright for this company.
Consistent growth is predicted over the next two years, with analysts suggesting the company will make $22.4 billion in 2022 and $23.9 billion in 2023. Both are improvements over the company’s $20.3 billion revenue figures from 2021. Consistent growth is always a good thing in the luxury sector, suggesting this may be a perfect share to buy or hold in the short and medium term.
Currently trading at a little over $500 per share, Kering represents extremely expensive stock. But the outlook is good for the company. Analysts suggest that Kering stock will increase in value by 74.92% over the next five years.
What does that mean for you?
If you make a $1,000 investment today, you’ll be up to $1,749.20 in 2027, assuming the analysts are correct. Kering has dropped substantially from highs of nearly $1,000 per share in mid-2021. But it’s likely on the rebound, making this another great option to buy or hold.
Sticking with the trend of good performance, Burberry has enjoyed substantial gains during the last 12 months. Average price estimates suggest it will hit $24.39 per share by the end of 2022, which is a 21.65% increase on 2021’s numbers. Forecasts suggest the company will also experience revenue growth in 2022 and 2023, rising from $3.5 billion to $4.3 billion over the course of two years.
However, this growth is a little slower than many other brands in the luxury sector. If you have Burberry stock, it may be best to hold onto it for a few years to benefit from later growth. Buyers may not get impressive short and medium-term results, though the long-term outlook appears positive.
Hermes is another company that’s likely to make short-term gains but is stuck in something of a holding pattern over the medium-term. Its 12-month figures suggest a 28.88% increase, with stocks likely to trade at an average of $141.00 by the end of 2022.
That said, the company’s projected revenue figures don’t demonstrate extensive short or medium-term growth. Hermes reported earnings were $2.64 billion in 2021. Current projects place its 2022 earnings at about $2.80 billion, with 2023 likely to see a bump up to $3.15 billion. This is consistent growth, though it’s not spectacular. Like Burberry, Hermes stock is in a hold position right now, though you may consider buying if you have an eye on long-term results.
Note: Please do not invest money or assets in the financial markets that you cannot afford to lose. This article should not be construed to be investment advice and is for information purposes only