Eugenio Catone @CatoneEugenio: "𝐋𝐕𝐌𝐇: 𝐀 𝐋𝐮𝐱𝐮𝐫𝐲 𝐆𝐢𝐚𝐧𝐭 𝐍𝐚𝐯𝐢𝐠𝐚𝐭𝐢𝐧𝐠..."

Italy

𝐋𝐕𝐌𝐇: 𝐀 𝐋𝐮𝐱𝐮𝐫𝐲 𝐆𝐢𝐚𝐧𝐭 𝐍𝐚𝐯𝐢𝐠𝐚𝐭𝐢𝐧𝐠 𝐭𝐡𝐞 𝐂𝐡𝐢𝐧𝐞𝐬𝐞 𝐇𝐞𝐚𝐝𝐰𝐢𝐧𝐝𝐬 As you might noticed, several weeks ago I added $MC.PA (LVMH Moet Hennessy Louis Vuitton SA) and now holds up 3.30% of the portfolio. Since LVMH is a great company, therefore not often cheap, I have been waiting months before buying it. The recent challenges due to the Chinese economic slowdown created such a opportunity and I didn't want to miss it. What I invested is only a small part; potentially LVMH can take up to 10% of the portfolio if the price drops much more than the current level. 𝐀 𝐒𝐭𝐫𝐨𝐧𝐠 𝐅𝐨𝐮𝐧𝐝𝐚𝐭𝐢𝐨𝐧 LVMH's iconic brands, such as Louis Vuitton, Dior, and Moët & Chandon, have stood the test of time. These brands have built a reputation for excellence, craftsmanship, and exclusivity, making them highly desirable to consumers worldwide. The company's diverse portfolio, spanning fashion, accessories, watches, jewelry, perfumes, and wines, provides a degree of resilience and diversification. Competitors like $KER.PA (Kering SA) and Burberry don't have enough brand to diversify their revenue so much. Some of these brand have been leaders of their reference market for more than 100 years, so the brand awareness is definitely the strength of LVMH. 𝐍𝐚𝐯𝐢𝐠𝐚𝐭𝐢𝐧𝐠 𝐭𝐡𝐞 𝐂𝐡𝐢𝐧𝐞𝐬𝐞 𝐇𝐞𝐚𝐝𝐰𝐢𝐧𝐝𝐬 After the real estate bubble, China is experiencing its 2008 and LVMH is struggling to increase its revenue in this country. China has always been one the most proficient geographic area to rely on, but now sales are declining and there isn't much that LVMH can do to prevent it. It's not a problem of the company, it is a problem of the whole country. Chinese are cutting their consumptions and luxury is not their main thought in this moment. However, sales in Japan grew 57% compared to Q2 2023 and this is a sign that Chinese still love LVMH's brand. A lot of Chinese, while travelling in Japan, are buying LVMH's products there since it is less expensive (Yen devaluation exacerbated this process). Some Chinese, since Japan is near China, are willing to travel in order to buy their favorite brands. This fact, which is well discussed in the last conference call, is a sign that Chinese still love LVMH, the problem is that their economy is not sound as in the past. Anyway, unless we think China will face a 10-years recession, is just a short term problem that won't affect too much LVMH sales over the next 10-15 year. 𝐊𝐞𝐲 𝐒𝐭𝐫𝐚𝐭𝐞𝐠𝐢𝐜 𝐑𝐞𝐬𝐩𝐨𝐧𝐬𝐞𝐬 Geographic Diversification: LVMH has expanded its operations into emerging markets, such as India and the Middle East. This diversification helps reduce reliance on China and tap into new growth opportunities. Digital Transformation: The company has embraced digital technology to enhance customer experience and reach new markets. Investments in e-commerce, social media, and personalized marketing have helped LVMH adapt to changing consumer behaviors. Product Innovation: LVMH's commitment to product innovation ensures that its brands remain relevant and desirable. By introducing new and exciting products, the company can drive demand and differentiate itself from competitors. 𝐅𝐢𝐧𝐚𝐧𝐜𝐢𝐚𝐥 𝐒𝐭𝐫𝐞𝐧𝐠𝐭𝐡 𝐚𝐧𝐝 𝐑𝐞𝐬𝐢𝐥𝐢𝐞𝐧𝐜𝐞 LVMH's strong financial position provides a solid foundation for future growth. The company's ability to generate significant operating cash flow allows it to invest in research and development, marketing, and acquisitions. This financial flexibility is essential for navigating challenging economic conditions. Over the last 10 years, free cash flow CAGR was approximately 11%. 𝐕𝐚𝐥𝐮𝐚𝐭𝐢𝐨𝐧 𝐚𝐧𝐝 𝐏𝐨𝐭𝐞𝐧𝐭𝐢𝐚𝐥 𝐑𝐞𝐭𝐮𝐫𝐧𝐬 Despite the recent market volatility, I believe that LVMH's shares are undervalued; by buying it at these prices, I expect an annual 10-12% return. The company's strong fundamentals, competitive advantage, and long-term growth prospects justify a premium valuation; if you look at valuation multiples, they don't usually get so cheap. As the global economy recovers and the Chinese luxury market rebounds, I anticipate significant upside potential for LVMH's stock price. 𝐂𝐨𝐧𝐜𝐥𝐮𝐬𝐢𝐨𝐧 LVMH is a company that I'm confident will continue to thrive. Its iconic brands, strong financial position, and strategic focus make it a compelling investment opportunity. While there are risks associated with any investment, I believe that the potential rewards of owning LVMH far outweighs the downsides. In this industry competition is fierce, but I do think LVMH has enough experience to get through. $FRA40 $UK100 $SPX500

5 Mentioned

MC.PA

LVMH Moet Hennessy Louis Vuitton SA

KER.PA

Kering SA

FRA40

UK100

SPX500

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