Experts insist on buying luxury: the five companies that Barclays prefers

LVMH

€710,600

Bolsamanía has spent months collecting the opinions of experts, its own and others, recommending buying European luxury firms. Many of them rise non-stop, reach maximums and show no weakness in the face of a pandemic that, instead of hitting them, has paradoxically reinforced them.

HSBC, Deutsche Bank... and now Barclays. There are many who believe that it is necessary to invest in a sector "of secular growth and of high quality". In its latest report, Barclays acknowledges that many of these companies have been trading at highs. Even so, he still sees them traveled and considers that you have to take advantage of the last falls to enter.

"We started eleven companies. We are overweight Swatch, Prada, LVMH, Richemont and Kering. We are neutral on Hermès, Moncler, Mulberry and Burberry. We are underweight Tod's and Ferragamo. Our favorites are Swatch and LVMH, while Tod's is our least favorite." , they explain.

WHAT ABOUT CHINESE?

Barclays has carried out an in-depth analysis of the situation in China to determine its preferences among European luxury companies. From the firm they explain that they are less bearish than the consensus regarding the impact of the regulatory measures that could arise after the comments of the Chinese president, Xi Jinping, supporting common prosperity and the control of excessive income.

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"Sector growth is primarily driven by a growing middle class, and the market may be overpricing the impact of negative sentiment. For us, the long-term outlook for luxury in China is positive. Our analysis of store traffic conducted before Third quarter results show especially good momentum at LVMH, Kering and Richemont."

THE IMPORTANCE OF ESG CRITERIA

Los expertos insisten en comprar lujo: las cinco compañías que prefiere Barclays

ESG criteria (environmental, social and governance) are going to be key for Generation Z and Millennials, who ultimately should generate 70% of luxury company sales in 2025. In this sense, Barclays highlights the importance that these companies have this sector of the population very present, while they see some weakness in terms of governance in Burberry, with better data than expected on this aspect in Swatch and Tod's.

"Generation Z's heightened attention to diversity and inclusion could lead the market to reevaluate its view of governance," says Barclays. In addition, the new generation could also push the sector towards a greater attention to durability. This, according to his analysis, could translate into M&A opportunities in the resale/rental market (Kering is the most likely to do so, in his opinion) and represent a structural change if brands integrated this into their own model. of business in the future," explains Barclays.

COVID RECOVERY

Barclays expects most companies in the sector to return to pre-Covid-19 margins this year, while for Kering, Moncler Ferragamo and Tod's, margin recovery should occur a year later.

"Despite short-term shocks, we believe the long-term growth drivers (ie expansion of the middle class) remain unchanged despite Covid, while there remains room for opportunity in the sector," they conclude. these experts.

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