By Jeff Reeves, MarketWatch
There’s no shortage of think pieces out there lately about how voters in Trump country are among those who could be hardest hit by a looming trade war with China and Europe.
From farmers who send soy, beef and other goods to China to blue-collar workers in the Midwest who watched Harley-Davidson (HOG) move production offshore to avoid retaliatory tariffs, the list of likely targets is long and varied. Heck, there’s even talk about how businesses from Chick-fil-A to Home Depot /zigman2/quotes/208081807/composite HD +1.85% will see prices rise.
But one group who could care less about any potential trade wars driving up costs? The rich.
Does it matter to them if the big-ticket items they’re purchasing cost an extra $500 or even $1,000? In some cases, that higher price tag may make certain imported goods even more exclusive, as a marker of wealth for only those who can afford them.
I’ll leave it to others to moralize over trade wars or income inequality. I’ll simply note that for investors, one of the few places that will be safe from any potential trade war is the luxury goods marketplace, where rich folks are more than willing to spend a little bit extra for their status symbols.
Here are seven such luxury stocks that should hang tough regardless of any trade war overtures in 2018.
Michael Kors Holdings seems to be unstoppable, with an amazing 90% gain in the last 12 month. The stock price got a bit frothy after the frenzy of its 2012 IPO; however the company has proven in the intervening years that it is not just a flash in the pan and has true staying power. Its consistent revenue and profit growth have won Wall Street’s confidence, and the 2017 acquisition of shoemaker Jimmy Choo for $1.2 billion looks to open more doors and broaden the product line for this luxury fashion house. Shares are within reach of a new 52-week high, and a strong earnings report in August could spark another move higher.
Few brands stand for luxury more than France’s LVMH Moët Hennessy Louis Vuitton /zigman2/quotes/201350549/delayed FR:MC -3.04% /zigman2/quotes/202542535/composite LVMHF -0.88% /zigman2/quotes/201256382/composite LVMUY -0.02% . Its brands include fashion house Louis Vitton and champagne bottler Moet, among others. Things have been particularly plush lately for investors, too, with the stock up 30% in the last 12 months and a share price that has roughly doubled in the last three years. This is because of both its powerful top-tier brands as well as so-called “aspirational” product lines that allow the merely well-off to own products typically associated with the super rich.
Jewelry icon Tiffany & Co. has been having a heck of a run lately, with the stock up about 40% in the last 12 months. That’s in large part because of a big earnings beat in May that pushed shares to a new all-time high. A confluence of factors, including a shift in its collection to more contemporary styles as well as strong consumer spending metrics, have helped the company Tiffany track double-digit profit and sales growth this year — and Wall Street is expecting another strong showing in the company’s next report in August.
Who cares about fuel efficiency or self-driving technology if you’re a car lover with deep pockets? The 2015 IPO of luxury car icon Ferrari /zigman2/quotes/208128355/composite RACE +0.48% /zigman2/quotes/200586103/delayed IT:RACE -0.29% allows even small-time investors to get a share of this exclusive automaker. And if you did buy the stock roughly three years ago, you’d be up about 140%, including 30% or so in the last 12 months, even with the recent hit from the sudden departure of parent Fiat Chrysler Automobiles CEO Sergio Marchionne and his death a few days later. And while Marchionne’s death adds a bit of uncertainty, the company had already planned for a handover of the CEO role later this year.
Moreover, growth has continued this year, with the company reporting in May that net profit was up a stunning 19% despite all of the broader uncertainty and volatility over trade wars. Shipping only a few thousand high-margin autos to well-financed customers makes for a pretty attractive business right now — and one that makes the risk of any tariffs pretty unimportant.
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PVH Corp. /zigman2/quotes/208313660/composite PVH -0.27% is the parent of upscale apparel designers including Tommy Hilfiger and Calvin Klein. It also holds licensing agreements with other powerhouses like Kenneth Cole and DKNY. Thanks in part to strong consumer spending trends in the U.S., which helped fueled a beat on the top and bottom line in PVH’s latest earnings report at the end of May , shares are up 30% in the last 12 months. But equally important for the company’s long-term growth is impressive success in China — a trend that could remain largely unaffected by any trade wars or tariffs as these Western labels are seen as status symbols and thus worth any extra expense to brand-conscious Asian consumers.
At the end of 2017, Coach changed its name to Tapestry /zigman2/quotes/207417762/composite TPR +0.05% as a way to acknowledge other brands under its umbrella, including Kate Spade and Stuart Weitzman. But whatever you call the stock, results have been strong; the company is tracking an impressive 30% top-line expansion this year thanks in part to the Kate Spade deal and a 20% bump in earnings per share. Shares lurched lower in the spring despite these strong growth metrics in part because of deep declines in comparable sales. However, that’s an intended move, as Tapestry looks to make its products more exclusive — driving up margins in the long-term and shoring up the idea that its handbags and shoes are truly luxury items worthy the price.
Luxottica Group admittedly got ahead of itself in 2015 as momentum waned, upstarts mounted challenges and fears of succession issues at the company sparked some investor uncertainty. But while some investors were burned by the stock’s fall from grace, remember that this eyewear giant has some of the most powerful brands — and most expensive price tags — in the marketplace. These include Ray Ban and Oakley as well as designs under license for Armani, Burberry and Chanel. In the first half of 2018, the company reported record adjusted margins , proving that its brands are connecting at high price points. With continued results like these, the ADRs could soon challenge prior highs.