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Use this Fund to Profit from the $150 Billion Market
for Luxury Goods |
Published:
October
12,
2007
Launched by Claymore on July 30th, the Claymore/Robb Report
Global Luxury ETF (NYSE: ROB, $26.66) targets the upper crust of
the consumer discretionary sector. Specifically, ROB is designed
to track the performance of the world's premium luxury
companies.
The specialty index tracked by the fund was constructed by Robb
Media, which manages a number of publications aimed at the
ultra-affluent, including: Robb Report Vacation Home, Robb
Report Luxury Resorts, and Robb Report Sports & Luxury
Automobile.
Robb has its finger on the pulse of the world's wealthiest
individuals and is ideally positioned to construct a benchmark
comprised of luxury goods and service providers. The portfolio
contains about 40 holdings that read like a "who's who" of
upscale brand names: Christian Dior, Harry Winston, Hermes
International, Polo Ralph Lauren (NYSE: RL), Porsche, Saks
(NYSE: SKS), Sotheby's (NYSE: BID), Tiffany (NYSE: TIF), and
Wynn Resorts (Nasdaq: WYNN), among others.
This fund will serve as a barometer of global spending on luxury
items. While a swift downturn in the economy might take its toll
on a discount retailer like Wal-Mart (NYSE: WMT), it is
generally acknowledged that wealthier consumers won't exactly
feel the pinch. In fact, most will continue to sip the finest
champagne, visit the most exotic resorts, sail the sleekest
yachts, and shop at the trendiest boutiques.
And growth in the market for luxury goods looks to be strong
going forward. Just a few weeks ago, Forbes released its
annual list of the 400 richest Americans. It now takes $1.3
billion just to reach the very bottom of that list, about $300
million more than last year. And around the world, the number of
households with at least $1 million in liquid assets has doubled
over the past decade.
Because ROB just hit the market, the fund has no established
track record, but companies that cater to the rich generally
have some favorable characteristics: entrenched brand names,
loyal customer bases, strong pricing power, and lofty profit
margins. In fact, top holdings like Tiffany (NYSE: TIF) and
Coach (NYSE: COH) have trounced the market over the past five
years.
Regardless of the ebbs and flows of the economy, wealthy
consumers will shell out about $150 billion on luxury goods this
year -- a total that is projected to rise about +7% annually
over the next five years, according to Telsey Advisory Group.
Should that forecast pan out, then some of that wealth will find
its way into the hands of ROB shareholders.
Our View --> While this is a
relatively novel concept here in the U.S., foreign investors
have actually placed billions in similar luxury funds. And
looking at the demographics, it's easy to see why.
With stakes in developed countries like France, Switzerland,
Italy, and Germany, we think ROB offers global exposure to some
of the world's most iconic companies. Looking ahead, the recent sharp rate cut is likely to spur additional spending on
big-ticket items. And considering most luxury retailers are
somewhat recession-resistant, the fund's portfolio holdings
aren't likely to be greatly damaged by a slowdown in the global
economy.
Still, given its narrow focus, the fund would be more suitable
as a niche portfolio addition rather than a core holding.Good investing!
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Nathan Slaughter
Editor
The ETF Authority, Half-Priced Stocks
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