The luxury industry continues to make its move up. That's according to Scilla Huang Sun, head of equities at Swiss & Global Asset Management, who tells The Wall Street Journal why luxury—and luxury stocks—are worth a look.
"The luxury industry is growing and profitable," Huang Sun tells WSJ. "Wealth creation is the main driver of luxury spending, which is rising fast in emerging markets. Asian consumers, in particular the Chinese, love Western luxury brands and are making a decisive contribution to growth.
She says that expectations for 2011 are for the luxury sector to grow by 7 percent to 9 percent and be primarily driven by growing wealth in emerging markets, especially China. "We estimate that the Japan and Middle East events will reduce sales growth by 2% in 2011. In general, the mood in the luxury sector remains quite upbeat. For example, comments made at the Swiss watch fair in Basel were very optimistic and some of the brands are even suffering supply bottlenecks. Like in many other industries, luxury companies face higher production costs, but a big part can be passed to the consumers given the pricing power of luxury brands. Luxury stocks are trading at historical averages. Investors can secure high-street prices for luxury stocks."
So, who are the luxyury brands making noise. She says: Louis Vuitton, Hermès, Cartier, Omega, Tod's, Burberry, Tiffany and Estee Lauder. "They are all very global and well managed," she says. "We still like watches as they also look attractively valued. We continue to like shoes of top brands as these companies have high pricing power and are less affected by global inflation and cost increases."