Did you know that most major luxury stocks have consistently outperformed the market in recent years? The industry’s strongest brands have benefited substantially from a growing number of affluent consumers willing to spend generously on brands renowned for their quality, refinement, and overall prestige.
Multiple underlying factors fuel this trend. The most notable one is, without a doubt, the economic growth in many regions, particularly in emerging markets like China, which has led to an increase in wealth and disposable income among consumers. Secular trends, like the expansion of international travel and globalization, have also bolstered the industry’s success.
Particularly interesting is the fact that luxury stocks have shown resilience in the face of economic downturns — an aspect that has also contributed to luxury majors beating the overall indices. Take the years of 2020 and 2021, for instance. Despite the challenges of the COVID-19 pandemic, the global luxury industry showcased resilience, posting strong sales in both years. Unsurprisingly, affluent consumers have proven less susceptible to economic downturns than the average consumer.
The following three luxury stocks to buy have beaten the market over extended trading periods, as their strong brands have driven robust, profitable growth. With solid grounds to expect their current trajectory won’t be disputed anytime soon, these three names have a strong chance to continue to producing attractive returns moving forward.
LVMH Moët Hennessy (LVMUY)
LVMH Moët Hennessy (OTCMKTS:LVMUY) stands out as a prime example of the luxury industry’s enduring strength and resilience. In a testament to this, the Paris-based luxury giant claimed the title of Europe’s most valuable company last year. Despite recently losing the crown to Novo Nordisk (NYSE:NVO), the company’s $410.6 billion market cap clearly shows the industry’s size and strength, as last year’s achievement took place in a somewhat shaky macroeconomic environment.
LVMH’s strong performance stems from both organic and value-accretive, acquisition-based growth, a trend clearly illustrated in its results over the past decade. For context, LVMH’s revenues and earnings per share (EPS) have grown over the 10 years at a compound annual growth rate (CAGR) of 11.5% and 16.1%, respectively. LVMH’s momentum remains strong, with revenues and EPS rising by 9% and 8%, respectively, to $93.4 billion and $6.58 last year — both record figures.
Despite prevailing geopolitical and macroeconomic uncertainties, LVMH kicked off 2024 on a high note, with its management team remaining confident in its ability to sustain strong growth. Given its promising near and long-term prospects, I find LVMH stock one of the best luxury stocks to buy.
Hermes International (HESAY)
Hermes International (OTCMKTS:HESAY) is another great example of a French luxury giant whose shares have outperformed both major European and U.S. indices. Recognized for its focus on craftsmanship and innovation within the industry, the brand’s iconic logo has become synonymous with prestige and exclusivity.
By cultivating a loyal customer base while enjoying fantastic pricing power, Hermes has managed to grow its revenues and profits quite rapidly over the years. In fact, its revenues and EPS have grown at a 13.6% and 18.5% respective CAGR over the past 10 years. This is a truly exceptional track record over an extended trading period that has fueled the market-beating performance of Hermes stock.
Hermes’ FY2023 results marked another year of record revenues and EPS, which grew by 21% and 28% to $14.6 billion and $4.46, respectively. The company is well-positioned for a strong FY2024 as well, with revenues rising by 17% in constant currency in Q1, charting a promising trajectory. Thus, despite its lengthy rally, I think Hermes stock is still one of the best luxury stocks to buy these days.
Ferrari (RACE)
Ferrari (NYSE:RACE) stock reached a new all-time high in late March, maintaining its impressive trajectory of market-beating returns. The iconic luxury sports car manufacturer, known for its high-performance vehicles, racing heritage and distinctive red color, leverages the scarcity of its products to command premium pricing.
More specifically, despite only marginal growth in its car shipments from year to year, its financials have been growing at a rapid pace on the back of strong pricing. Take last year’s results, for example. While Ferrari’s shipments totaled 13,663 units in 2023, up only 3.3% year-over-year, total revenues for the year grew by 17.2% to $6.5 billion.
Higher pricing has also allowed Ferrari to widen its margin substantially over time. Last year’s results also showcased that, with adjusted EPS growing by a much more significant 36% to $7.47.
This strategy has worked well for Ferrari stock, translating to a strong, decade-long track record of growth. Its consistent revenue growth and ongoing margin expansion are evident in Ferrari’s revenues and EPS, which have advanced at a 10-year CAGR of 9.8% and 18.4%, respectively.
Seeing a positive product and country mix, as well as a strong demand for personalization, the company expects FY2024 to be another year with record profits. Management expects adjusted EPS to reach $8.14 this year, suggesting a sustained growth trajectory. For this reason, RACE stock remains one of the best luxury stocks to buy in my book.
On the date of publication, Nikolaos Sismanis did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
