In this article, we will look at the Top 12 Luxury Stocks According to Hedge Funds.
The Luxury Goods Market and Consumer Behavior
According to a report by Mordor Intelligence, the luxury goods market has a size of $103.10 billion as of 2024. It is expected to grow at a compound annual growth rate (CAGR) of 7.07% and reach $145.08 billion by 2029. Similarly, a study by Global Market Insights published on Yahoo! Finance shows that the luxury packaging market was valued at $17.2 billion in 2023. It is also anticipated to grow and reach $25.8 billion by the end of 2032.
North America’s demand for luxury products is significantly high, primarily due to the region’s high disposable incomes. This is especially significant in the ongoing holiday shopping season in the US. On December 17, Simeon Siegel, BMO Capital Markets senior analyst for retail and e-commerce, appeared on CNBC to discuss the state of the consumer in the current holiday shopping season. He said that the US consumer is overly resilient. In the current scenario, the market is seeing winners grow and laggers fall behind, which is how it should be. This trend goes opposite to market dynamics in COVID-19 when every company grew. Siegel was further of the view that the consumers are still spending. For better and for worse, consumers are scared of not having something under the Christmas tree this year.
On December 10, CNBC’s Steve Liesman appeared on ‘Squawk Box’ to discuss the CNBC NRF Retail Monitor. Numbers from the Monitor corroborated Siegel’s claim and showed healthy consumer spending in November despite a shorter holiday shopping season in 2024. Non-store retailers showed a 21.5% year-over-year growth, reflecting these positive trends. Since this holiday shopping season came with lower gas prices and a deflation in the prices of goods overall, consumers had more discretionary dollars in their pockets and paid somewhat less compared to a year ago. Since luxury items fall in the category of discretionary items, these trends show positive stimulus for the industry.
We discussed consumer behavior in the ongoing holiday shopping season in a recently published article on the 7 best department store stocks to buy now. Here is an excerpt from the article:
“The holiday shopping season is in full swing in the United States. On December 2, Jessica Moulton, senior partner at McKinsey & Company, appeared on CNBC to discuss Black Friday spending and its effects on consumer sentiment. She said that while 2024 was a challenging year for retailers, the numbers rolling in from the holiday season seem promising. High hopes were especially placed on Black Friday sales, and while the numbers aren’t all in, they look pretty good. This trend holds particularly true online, where sales seem to be up by 15% or so compared to last year in many markets. According to CNBC, the total Black Friday e-commerce spending was around $10.8 billion. However, Moulton said that footfall in stores wasn’t so good, and continued to be flat year-over-year.
She said the trends in the sector are changing, with around 75% of shopping journeys starting online at the outset. Although some of them end up with consumers paying visits to the brick-and-mortar stores, much of the shopping journeys end with sales happening online. Furthermore, the retail sector is showing consumer behavior that tends to undertake a multiple retailer journey these days. If it is a bigger purchase, most consumers prefer checking out four to five retailers, either online or offline. This poses a significant change in the sector as compared to around two decades ago”.
Consumers Looking Towards Value at a Discount
On December 2, Mastercard Economics Institute chief economist Michelle Meyer appeared on CNBC to discuss industry trends and said that consumers have been geared to find value and best deals. She said that the Black Friday numbers show that consumers have been monitoring the market and gearing up to spend on the Black Friday weekend.
With inflation cooling and promotions returning, consumers are focused on finding the best deals in the market that offer value at a discount. This was one of the major motivating factors that drove considerably strong spending in e-commerce during the Black Friday weekend. Apparel, jewelry, and electronics remain the top gift sectors for the holidays, but consumers are prioritizing promotions with the greatest value instead of going ahead with brand loyalty. Meyer was of the view that consumers have the ability and the willingness to spend; they are just being savvy with their expenses by spending when promotions and deals come in.
With these trends in view, let’s look at the top 12 luxury stocks according to hedge funds.
Top 12 Luxury Stocks According to Hedge Funds
Our Methodology
We sifted through stock screeners, online rankings, and ETFs to compile a list of 30 luxury stocks. We then selected the top 12 most popular stocks among elite hedge funds as of Q3 2024. We sourced the hedge fund sentiment data from Insider Monkey’s database. The list is sorted in ascending order of hedge fund sentiment.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Top 12 Luxury Stocks According to Hedge Funds
12. Harley-Davidson, Inc. (NYSE:HOG)
Number of Hedge Fund Holders: 23
Harley-Davidson, Inc. (NYSE:HOG) operates Harley-Davidson Motor Company (HDMC) and Harley-Davidson Financial Services. HDMC manufactures and designs luxury Harley-Davidson motorcycles, motorcycle parts, apparel, and accessories. It operates globally, with operations in the EMEA region, Asia, the United States, Canada, Asia Pacific, and Latin America.
The company experienced a challenging global market environment in fiscal Q3 2024 due to macroeconomic and political uncertainty and the pressure of high interest rates affecting its industry and customers. As a result, its global retail sales of new motorcycles dropped by 13% in fiscal Q3 2024. North America saw a 10% decline, compared to 18% across international regions.
Overall, Harley-Davidson, Inc. (NYSE:HOG) is seeing greater spending from higher-income customers. Its motorcycle mix corroborates this, with CVO motorcycles up double-digital percentages throughout 2024.
The company’s touring segment in the United States was up by around 10% through the end of fiscal Q3 2024. This growth was driven by its new touring lineup. It gained more than four percentage points of market share, outperforming the category, its other segments, and the market as a whole. Harley-Davidson, Inc. (NYSE:HOG) ranks 12th on our list of the top 12 luxury stocks according to hedge funds.
Artisan Select Equity Fund stated the following regarding Harley-Davidson, Inc. (NYSE:HOG) in its Q2 2024 investor letter:
“The biggest detractors from performance during the quarter were Harley-Davidson, Inc. (NYSE:HOG), Henry Schein and Expedia. Harley’s share price declined 23% during the quarter after a strong run in Q1. We had significantly reduced our position at higher share prices over the past 12–18 months. The shares have been weak over concerns that higher interest rates are impacting affordability and retail sales. We share these concerns. Harley is likely to reduce its forecasts for the year when it reports, though this now appears to be discounted in the valuation. Famous last words. The shares now trade at a single-digit multiple of earnings. We believe the brand is strong, and management is able to adjust production and costs to meet various demand environments. If interest rates begin to decline as anticipated, demand should improve.”
11. Coty Inc. (NYSE:COTY)
Number of Hedge Fund Holders: 26
Coty, Inc. (NYSE:COTY) is a beauty company that operates a portfolio of brands in color cosmetics, fragrance, and skin and body care. Its Prestige segment operates an array of luxury brands, including Gucci, Marc Jacobs, Miu Miu, Tiffany & Co., Kylie Cosmetics by Kylie Jenner, Hugo Boss, Burberry, Chloe, Calvin Klein, SKKN BY KIM, and more. The company markets and sells its products in more than 121 countries across the globe. Coty, Inc.’s (NYSE:COTY) mass beauty products are primarily sold through supermarkets, hypermarkets, drugstores, department stores, e-commerce retailers, and other channels.
Although the company’s fiscal Q1 2025 growth was moderately lower than expected, it continued to outperform global beauty companies. It delivered like-for-like growth in 9 out of the last 13 quarters, positioning it ahead of its global peers and giving it a competitive advantage. Its net revenue for fiscal Q1 2025 grew by 4.5% like-for-like. This growth was attributed to solid growth in the company’s fragrance, mass fragrance, and mass skin care businesses.
Coty, Inc.’s (NYSE:COTY) prestige fragrance portfolio is performing exponentially. It delivered strong growth in fiscal Q1 2025, especially in the EMEA region. The company’s growth engine markets include Mexico, Brazil, the rest of LATAM, China, India, Southeast Asia, the Middle East, and Africa. Put together, these growth engine markets accounted for around 21% of the company’s fiscal Q1 2025 sales. They also grew strongly at 15% like-for-like in fiscal Q1 2025, including approximately 5% contribution from the hyperinflationary environment in Argentina. Coty, Inc. (NYSE:COTY) takes the 11th spot on our list.
Columbia Contrarian Core Fund stated the following regarding Coty Inc. (NYSE:COTY) in its Q2 2024 investor letter:
“Coty Inc. (NYSE:COTY) – Coty is a beauty company specializing in fragrance, skincare and makeup. For many years, Coty has underperformed peers due to a dilapidated brand portfolio, slow innovation, poor execution, high leverage, and more recently, concerns about fragrance category durability. However, under the leadership of CEO Sue Nabi, the company is undergoing a turnaround by accelerating prestige fragrances and stabilizing consumer beauty products through innovation and improved execution. Fragrances have been extremely strong, and that is Coty’s main product line. However, there is a concern that the market will turn over despite Coty’s management trying to explain that this is a generational shift in usage globally. In addition, Ulta has been losing market share to Sephora, so the entire U.S. beauty market is in a bit of a limbo, adding to uncertainty. Finally, U.S. data from analysts throughout the quarter largely looks only at mass makeup data. Where e.l.f. Beauty is growing massively, Coty is holding share, and everyone else is suffering. This data completely ignores the prestige market where Coty is larger and growing faster. None of these factors are actually impacting Coty, but the stock has been getting dragged down by overall sentiment.”
10. PVH Corp. (NYSE:PVH)
Number of Hedge Fund Holders: 27
PVH Corp (NYSE:PVH) is a luxury fashion company that operates Tommy Hilfiger and Calvin Klein brands. The company undertook a disciplined execution of its brand-building growth plan, which it calls the PVH+ plan, in fiscal Q3 2024. As a result, it delivered on its revenue guidance with strong profitability and EPS.
PVH Corp (NYSE:PVH) came out of the summer season with less old-season clearance inventory, and its new-season inventory failed to fully compensate on its total top line. Revenue for fiscal Q3 2024 was down by 5% compared to last year, which included a 2% decline from the sale of its Heritage Intimates business. However, the company exceeded its guidance primarily due to the timing of wholesale shipments in Europe and an acceleration of expense efficiencies. It delivered an operating margin of 10.5%, surpassing analyst estimates. This was because higher gross margins and strong expense management offset the leverage loss that occurred due to a decrease in the company’s revenue.
The company’s D2C trends have returned to positive, reporting recovery for both September and October. It has plans to improve profitability and revenue in the holiday shopping season, and has a solid inventory composition set up with less old and more new season inventory than the same time in 2023. With consumers starting the holiday shopping season earlier this year, the company is on track for strong holiday performance across all its regions.
Overall, PVH Corp (NYSE:PVH) is positioning its brands for long-term, increasingly profitable sales growth. One example is its Fall 2024 product season, the first season where the company fully influenced product execution globally for both its brands. It experienced higher conversion and significantly stronger sell-throughs for the fall season product across both its brands and all regions compared to last year. As a result, its sell-throughs in Europe for the fall products were up double-digits across all channels. PVH Corp (NYSE:PVH) ranks 12th on our list of the top 12 luxury stocks according to hedge funds.
FPA Queens Road Small Cap Value Fund stated the following regarding PVH Corp. (NYSE:PVH) in its first quarter 2024 investor letter:
“PVH Corp. (NYSE:PVH) is an apparel company that owns the Tommy Hilfiger and Calvin Klein brands globally. Most of PVH’s earnings come from Europe, where the Tommy and Calvin brands are considered “almost luxury” and PVH has generally recorded high single-digit organic growth with demonstrated pricing power during the preceding decade. CEO Stefan Larsson has done an excellent job revitalizing the company and improving margins at PVH’s moribund US operations. Over the past year, PVH and our other apparel companies have performed well as the worst fears for consumer spending didn’t play out. PVH has become a top five holding for us and our apparel holdings (PVH, GIII, LEVI and DECK) now make up almost 10% of the portfolio. On April 2, post quarter end, PVH announced fiscal 23Q4 results where they missed on earnings guidance for the coming year. The stock is down ~20% from its high but now trades at less than ten times forward earnings. We have held our position.”
