How to Profit from the Growing Rich Poor Divide

Monday, Jan 16 2012 by
3
How to Profit from the Growing Rich Poor Divide

One of the most enduring and dominant investment themes of the 21st century is rising consumption. The argument is well established, the expansion of the middle classes in the emerging economies drive economic growth. The ‘global middle class’ is projected to reach over 1.2 billion people by 2030. Emerging from the burgeoning middle class is an upper stratum of affluent consumers, providing the impetus for higher discretionary spending. European products with strong, well-recognized brands are ideally placed to benefit from this trend.

Soaring incomes, a bulging upper middle class and technological advancements will inevitably lead to growing gap between the haves and the have-nots. However Astute Investors will be able to identify opportunities to profit from diverging incomes. As the rich continue to get richer, they will lavish more of their money on luxury goods. Therefore shrewd investors can tap into this trend by investing in luxury brands, rather than lusting after expensive and unattainable luxury goods. And in doing so, you would be letting the rich make you richer.

Investing in luxury goods are certainly in vogue, outperforming the ‘Morgan Stanley global equity index’ over the last five years. One pertinent example is the phenomenal success of British fashion brand Mulberry (LON:MUL) , their pre-profits more than tripled by 358% in the year 2011, March 31. And the share price has increased by nearly twenty fold since their March 2009 lows. Many other luxury European firms also boast similar stellar earnings growth underpinned by strong fundamentals and world-recognized brands. Together with consistent and strong economic growth rates in the emerging countries, the exponentially growth within the luxury goods sector remains firmly in place.

The rise of the Asian economies today remains critically important to luxury companies. For example Chinese consumers today represent 40% of premium brand sales; this is expected to increase to over 60% by 2020. The new financial and industrial elite in Asia are increasingly consuming European luxury brands for their prestige and to underline their social status. Moreover Luxury brands have a further appeal amongst Asian consumers, because they were once the sole preserve of the aristocracy.

Renowned luxury brands luxury brands like Louis Vuitton and Tiffany’s will benefit from that fact that they have little or no competition; there are only few genuinely first class brands. Experts say it takes…

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Burberry Group plc is a manufacturer, wholesaler and retailer of luxury goods. The Company also licenses third parties to manufacture and distribute products using the Burberry trademarks. The Company's segments include retail/wholesale and licensing. The Retail/wholesale segment is engaged in the sale of luxury goods through Burberry mainline stores, concessions, outlets and digital commerce, as well as Burberry franchisees, prestige department stores globally and multi-brand specialty accounts. The Licensing segment is engaged in the receipt of royalties from the Company's partners in Japan and global licensees of eyewear, timepieces and European childrenswear. The Company's product divisions are Womens, Mens and Childrens apparel, Accessories, and Beauty (which includes fragrance and make-up). Its subsidiaries include Burberry Latin America Holdings, S.L, Burberry (Suisse) SA, Burberry (Taiwan) Co Ltd, Burberry (Thailand) Limited and Burberry FZ-LLC. more »

LSE Price
1849.5p
Change
-0.2%
Mkt Cap (£m)
7,622
P/E (fwd)
22.0
Yield (fwd)
2.5
74

Mulberry Group plc designs, develops, manufactures, markets and sells products under the Mulberry brand name. The Company operates through two segments: Retail and Design. The Company's Retail segment includes sale of Mulberry branded fashion accessories, clothing and footwear through a range of shops and department store concessions. The Company's Design segment includes brand management, marketing, product design, manufacture, sourcing and wholesale distribution for the Mulberry brand. Its product range includes women's wear, accessories and footwear. It offers products under various categories, including leather accessories, such as bags; small leather goods; shoes; soft accessories, and women's ready-to-wear. The Company distributes its products through over 120 stores in approximately 30 countries; its digital site, mulberry.com, and selected wholesale partners. The Company has operations in the United Kingdom, Rest of Europe, Asia, North America and Rest of world. more »

LSE Price
309p
Change
0.5%
Mkt Cap (£m)
184.6
P/E (fwd)
24.3
Yield (fwd)
1.6



  Is LON:BRBY fundamentally strong or weak? Find out More »


1 Comment on this Article show/hide all

harryr 16th Jan '12 1 of 1
2

Now on the same line as above see NTA

Northacre are the only London listed super prime Housebuilder..

All the others just build box after box.

London prime is the place to be as one can name your selling price, most can not.

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About Christopher OLeary

Christopher OLeary

Financial blogger, market contributor and private investor. Author and creator of ‘The Astute Investor’, an investment blog designed to help investors preserve and accumulate wealth. This blog also voices my thoughts and ideas to help my development and progression as a private investor. Furthermore, I  contribute investment ideas and analysis through 'Seeking Alpha' and 'The Motley Fool',  global financial media sites. http://seekingalpha.com/author/christopher-o-leary http://www.fool.co.uk/news/investing/company-comment/2012/05/30/why-you-might-buy-pearson.aspx more »

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