Recently my wife and I were discussing LVMH, Moet Hennessy Louis Vuitton SE, (OTCBB:LVMUY), the Paris-based luxury goods empire. She knew the first two initials stood for Louis Vuitton but couldn't come up with the last two. The M is for Moët & Chandon, a famous champagne maker, and the H is for Hennessey, an equally well-known purveyor of cognac. These are just three of the many brands cobbled together by Bernard Arnault over the years.
If you're interested in owning a large cap luxury firm that's survived, and in fact thrived, during the global economic upheaval of 2008-09 and then beyond, LVMH could be a great bet. The only thing is how to buy the stock of this French company. Here are three suggestions for doing so.
- LVMH, Moet Hennessy Louis Vuitton SE, is a French luxury conglomerate that owns several of the world's best known high-end brand in jewelry, spirits, fashion, and more.
- Based in Paris, American investors can buy the company's un-sponsored ADR on the over the counter (OTC) market.
- Other options include buying funds that invest in LVMH shares, but then you will also be owning interests in other companies as well.
Over the Counter
The first way is to buy the actual stock on the pink sheets, but this is an over the counter (OTC) market that is not as regulated and may be riskier than stocks listed on major exchanges.
One unsponsored ADR (OTCBB: LVMUY) is the equivalent of one-fifth of a share. Its closing price as of October 20 was $31.03. LVMH paid an annual dividend in 2010 of 2.10 EUR, which is the equivalent of around $0.46 per ADR once you convert the currency for a current yield of 1.53%. LVMH's over-the-counter share volume is actually quite reasonable, so liquidity isn't as big a concern as other OTC stocks. However, it is also nowhere near the 1.5 million shares traded daily on the Paris Exchange, LVMH's home base. If you employ an investment manager with a global presence, they can probably buy the European shares for you. Otherwise your only option to get direct access to these shares is OTC.
(For more, see The Over-The-Counter Market: An Introduction To Pink Sheets.)
Investors looking to buy a mix of luxury stocks like LVMH, Hermes, PPR and Richemont Group may want to consider a luxury sector exchange traded fund (ETF).
The GLUX - Amundi ETF S&P Global Luxury has total assets under management of around 14.07 EUR million (as of the start of March 2016). The goal of this ETF is to track and match the S&P Global Luxury Index’s performance. The ETF’s inception date is December 9, 2008, and the management company is Amundi Investment Solutions/ France. The ETF’s asset class focus is on equities and has an expense ratio of 0.25 - its current primary benchmark is the S&P Global Luxury Net TR. The fund has a geographical focus on the European Region – with a major share of around 67% on Germany, followed by Spain, Belgium, France, and the Netherlands.
A U.S.-dollar-denominated alternative to the ETF mentioned above is the LUXU - Amundi ETF S&P Global Luxury UCITS ETF - B USD, another ETF that like the GLUX attempts to replicate the S&P Global Luxury Index’s performance results. The ETF has been established very recently by the same management company (Amundi Investment Solutions/ France) – the fund’s inception date is the February 23, 2016.
In addition there is the SPDR S&P International Consumer Discretionary Sector ETF (NYSE:IPD), which invests in consumer discretionary stocks outside of the U.S. With 122 stocks in the portfolio, LVMH is the fifth-largest holding out of 122 companies. Interestingly, the
Closed end funds work like regular ETFs or mutual funds, except that they only take in new money during some initial period and then do not allow new investors.
One such fund that holds LVMH shares is specific to Europe, known as the European Equity Fund (NYSE:EEA), one of several closed-end funds from DWS Investments, itself a division of Deutsche Bank (NYSE:DB). The fund has been around since 1986, has 40 holdings, a reasonable number, with an average holding period of a year and a half. It's more than I like to see, but it's not outrageous.
The problem with a fund like EEA is that although it holds LVMH, it also holds 39 other European stocks, most of which are not in the luxury sector.
The Bottom Line
LVMH has been growing steadily over the past decade, from each of its five b business segments. It has also been making acquisitions, buying up Italian watchmaker Bulgari, and adding tremendously to the watch and jewelry segment's revenues. To own LVMH stock you can look to the OTC market and get some unregistered ADRs. If the OTC is not for you, you can look instead to luxury sector funds that hold LVMH or general European funds that do the same.