Use this Fund to Profit from the $150 Billion Market for Luxury Goods
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.
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 By Nathan Slaughter Editor, The ETF Authority Visit this link to learn more about this premium newsletter. View our subscription options for The ETF Authority. |
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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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