LVMHF - LVMH: High-Quality Compounding Surpasses Poor Sentiment

2024-01-29 12:53:43 ET

Summary

• The French luxury goods conglomerate reported strong results for 2023 to the surprise of a depressed market sentiment.
• These results demonstrated the underlying quality and pricing power of the brands and the management's successful capital allocation, thus resulting in a promising outlook for 2024.
• At the current valuation, I believe LVMH is a compelling buying opportunity for quality-focused investors.

LVMH ( LVMHF ) is the largest French luxury conglomerate and an investors' favorite during the last years, as the industry boomed and soft comparables were frequently beaten. However, after certain companies in the industry lowered their outlook for the coming year, industry reports and overall media become more cautious with their expectations for luxury companies going forward. As a consequence, investors faced declining share prices during the beginning of the year across the whole industry, most recently driven by Burberry's ( BURBY ) profit warning. The holding of family-leader Bernard Arnault, in particular, saw share price losses of 9% YTD and 15% compared to the last year. Nevertheless, the full-year results of the French powerhouse revealed that the fundamental strength of the company remained superb in contrast to the overall sentiment with promising secular growth prospects fully in place despite potential short-term normalization. Mr. Market was surely surprised by the '23 report, sending the stock price up to breakeven on a one-year basis....

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