Where luxury goes next
The thesis for investing in any one of these companies has to be broader than just “luxury is doing well.” For Nordstrom, it’s about the customer experience. For Michael Kors Holdings Ltd (NYSE:KORS), it’s the rise of the brand. At Saks Inc (NYSE:SKS), you might be interested in the rumored buyout. A Tiffany & Co. (NYSE:TIF) investment might hinge on a turnaround in the brand value. However, no matter what that specific thesis looks like, it needs to be underpinned by a belief in luxury’s growth potential.
There’s one big thing that makes me worry about investing in luxury stocks, right now — the slowdown in China. Not only does it bode ill for companies focusing on China, it’s going to have knock-on effects for domestic businesses. Spending by Chinese tourists overseas is third only to Americans and Germans. That spending is helping companies out, even if they have no locations in China, and a slowdown in the economy is going to slow that pipeline.
The reason to be hopeful about luxury stocks is that the American recovery is still unfolding. While the current crush may already seem unbearably long, the country is full of upside. That’s a longer-term view than some investors are happy with, though, and with the current quagmire in the federal government, investing in a positive outcome may seem like a bridge too far.
The article Why Now Might Be a Great Time to Buy That Diamond Stock originally appeared on Fool.com and is written by Andrew Marder.
Fool contributor Andrew Marder has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
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