26 KIPLINGER’S PERSONAL FINANCE^ 02/2020
firms not based in Europe: Tiffany
(TIF), the 183-year-old jeweler. With
the acquisition ($16 billion in cash),
Tiffany joins a portfolio of 75 LVMH
companies, which, in addition to
leather designer Vuitton, champagne
maker Moët & Chandon and cognac
king Hennessy, includes jewelers Bul-
gari and Chaumet; fashion houses
Christian Dior, Fendi, Givenchy and
Loro Piana; plus such odds and ends
as the upscale hotel chain Belmond,
the business newspaper Les Echos and
the famous bubbly Dom Pérignon.
LVMH shares have risen 59% in the
past 12 months, but the stock’s valua-
tion is not as high-end as you might
think: a price-earnings ratio of 24.5,
based on consensus profit projections
for the year ahead.
When LVMH targets acquisitions,
how does it convince the shareholders—
many of whom are founding-family
members—to sell? First, it offers li-
quidity, allowing great-grandchildren
to cash out, plus economies of scale
and management know-how. For ex-
ample, analysts say that Bulgari has
more than doubled sales since being
acquired by the conglomerate in 2011.
Smaller versions of LVMH are
thriving, too. KERING (PPRUY, $60), also
based in Paris, owns such high-fashion
brands as Gucci, Bottega Veneta, Yves
Saint Laurent, Alexander McQueen
and Brioni (whose suits are favored by
President Trump). For the nine months
ending September 30, Kering revenues
rose 17%. The stock trades at a P/E of
just under 20 (below that of LVMH)
and yields 2% (almost double LVMH’s
yield). COMPAGNIE FINANCIÈRE RICHEMONT
(CFRUY, $8), based in Bellevue, Switzer-
land, offers good value, trading well
below its 2014 high. Richemont leans
toward jewelry and watches, with
brands such as Cartier, Van Cleef &
Arpels, Piaget, dunhill and Chloé.More luxe than you think. Don’t be
deceived by the name of the SWATCH
GROUP (SWGAY, $14). It’s another Swiss
collector of luxury brands, including
Harry Winston, Omega and Jacquet-
Droz, a 261-year-old Swiss watchmaker
whose timepieces run well into the
tens of thousands of dollars. The stock
has fallen 40% since mid 2018 on weak
sales, but the problem appears to be
temporary, and the stock trades at aIF THE GLOBAL ECONOMY SLOWS, THESE FIRMS COULD SUFFER
AND THEIR SHARE PRICES MIGHT FALL. IN THAT CASE, BUY MORE.low valuation with nearly a 3% yield.
Another smaller, multi-luxury-
brand stock is London-based CAPRI
HOLDINGS (CPRI, $37), with a market cap
of almost $6 billion. It has three hold-
ings, all strong names: Jimmy Choo,
Michael Kors and Versace. But growth
lately has disappointed, and the stock
took a huge tumble, losing about 65%
of its value in the 12-month period
through the end of August 2019. It has
come back a bit since and trades at a
P/E of just 7, based on consensus earn-
ings forecasts for the 12 months ahead.
Want a U.S. company? TA P E S T RY
(TPR, $27) is based in trendy Hudson
Yards in New York. Its brands—Kate
Spade, Coach and Stuart Weitzman—
are high-quality but a notch below
luxury. Still, the stock, like Capri, may
be too attractive to ignore. Shares are
down by about half since April 2018
and trade at a P/E of just 10, based on
consensus forecasts for the coming 12
months, with a yield of more than 5%.
Other than Hermès, most great indi-
vidual luxury-goods firms have either
been acquired or—like Chanel, Rolex,
jeweler Graff and the world’s best
menswear designer, the Italian firm
Kiton—are private.
There is no need for a luxury-goods
mutual fund. Just buy LVMH, Kering
or Richemont—or all three—and
strongly consider the individual com-
panies and smaller multi-firm stocks
as well. If the global economy slows,
these companies could suffer and their
share prices might fall. In that case, buy
more. Developing a new luxury brand
is an expensive and time-consuming
venture. But you can become a partner
in the established ones. ■JAMES K. GLASSMAN CHAIRS GLASSMAN ADVISORY, A PUB-
LIC-AFFAIRS CONSULTING FIRM. HE DOES NOT WRITE ABOUT
HIS CLIENTS. HIS MOST RECENT BOOK IS SAFETY NET: THE
STRATEGY FOR DE-RISKING YOUR INVESTMENTS IN A TIME OF
TURBULENCE. HE OWNS NONE OF THE STOCKS MENTIONED
IN THIS COLUMN. CONTACT HIM AT JAMES_GLASSMAN@
KIPLINGER.COM.A SHOPPING BAG OF UPSCALE PICKS
Haute StocksLuxury-goods sales are soaring, driven in part by growth in China. Many of these firms are
headquartered abroad, but their stocks trade here as American depositary receipts.Company Symbol PriceMarket
value
(billions)Price-to-
earnings
ratio* Yield
Capri Holdings CPRI $37 $5.5 7 —
Compagnie Financière Richemont CFRUY 8 43.1 22 2.7%
Hermès International HESAY 75 76.4 42 0.9
Kering PPRUY 60 74.5 19 2.0
LVMH Moët Hennessy Louis Vuitton LV M U Y 89 219.9 25 1.1
Swatch Group SWGAY 14 13.9 15 2.9
Ta p e s t r y TPR 27 7.1 10 5.4
As of November 30. *Based on estimated earnings for the year ahead. SOURCE: Morningstar Inc.INVESTING