3 Reasons to be Bullish about Luxury Brand Stocks

http://www.benzinga.com/trading-ideas/long-ideas/14/02/4334829/3-reasons-to-be-bullish-about-food-stocksEverybody brings their “A” game to the “Invest for Kids Conference” in Chicago.

It is a gathering of the biggest names in finance such as Norman Peltz and Sam Zell pitching their best ideas to benefit a great cause. At the event in late October, Peter Zaldivar of Kabouter Management was bullish about Hotel Shilla, a Korean stock. What had Zaldivar the most enthused about Hotel Shilla was that it sold luxury brands for 40 percent less than the price in China, the biggest market for such products in the world. For investors there are 3 reasons to be bullish about luxury item stocks, ranging from well known brands such as Ralph Lauren RL and Coach KOPPBL.

A billion more consumers spending trillions more around the world is a good place to start.

According to a report from McKinsey & Co., “Urban world: Cities and the rise of the consuming class,” there will be one billion more joining the consuming class around the world that could “inject up to $30 trillion a year into the world economy by 2025.” That is very positive for luxury brands and other goods, as detailed in a previous article in Benzinga. Consumers are very status conscious in Asia, Africa, and other emerging market areas. That is especially true for those in China (who must love the 40% discount at Hotel Shilla shops). From the trillions more in spending from the one billion new consumers, there will be a great demand for the products of Ralph Lauren, Coach, Premier Opportunities and others in the sector.

This has been shown by the strong performance of the recent initial public offerings in the field due bullish outlook for the sector.

Moncler MONRF, an Italian maker of down jackets, soared more than 45 percent in its first day of trading back in December. Two years ago, its executives pulled back plans for an initial public offering due to market conditions. It was the biggest fashion house initial public offering since that of Michael Korrs KORS back in December 2011. Management obviously knew what it was doing by how well the stock performed. Investors should not overlook that in performing due diligence as it worked out very well for the investors in Moncler.

Small cap luxury brands can become blue chip holdings.

The world of consumer sentiment is fickle. But when a label establishes its brand as has Ralph Lauren and Coach, it rises in prominence. Positional marketing is key for that. For Ralph Lauren, it was for the WASP lifestyle in the United States. For Premier Opportunities, it will be distributing the Brunello Cuccinelli line, the Kiton Line, and the CABE Studio Lines to the lucrative Asian markets.

A billion new consumers will trillions more to spend is very compelling for investors looking for ways to capitalize on economic growth around the world.

According to a recent report from the International Energy Agency, more than 90 percent of the increasing demand for energy will be from emerging market nations such as China and India. These are the same countries where demand for the luxury goods of Coach, Premier Opportunities, Ralph Lauren, Moncler, Michael Korrs, and others should be rising the most.