📌 Luxury sector: quality brands in weak sentiment?

Lately I’ve been trying to look mainly where sentiment isn’t ideal.

Not where everyone chases the biggest hype.

Not where stocks have shot up by tens of percent in a few months.

But where quality companies are going through a weaker period, investors are cautious and valuations start to look more interesting.

One of the sectors that currently interests me is luxury.

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The luxury sector has been very strong in recent years.

Companies like Ferrari, LVMH, Hermès, Richemont or Kering have long benefited from growing wealth, a strong Chinese consumer, globalization, tourism, rising demand for premium products and extremely strong brands.

But today sentiment is no longer so positive.

The market is dealing with several problems:

🔹 a weaker Chinese consumer

🔹 geopolitical uncertainty

🔹 tariffs and currency pressures

🔹 lower demand from aspirational customers

🔹 a slowdown after strong years

🔹 higher costs

🔹 pressure on margins

🔹 concerns that luxury won’t grow as fast as before

That’s precisely why I think it’s worth watching this sector.

Not because it’s without risk.

But because with the highest-quality luxury companies, bad sentiment can create interesting opportunities.

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Luxury is not an ordinary consumer sector.

When someone buys an ordinary t-shirt, shoes or a car, they often consider price, function and availability.

It’s different with luxury.

Luxury sells status.

Identity.

Scarcity.

History.

Emotion.

Story.

A social signal.

And this, in my view, is a big moat.

A strong luxury brand can’t be built overnight.

You can’t just create a new Ferrari, Hermès or Louis Vuitton by pouring money into advertising.

These brands were built over decades.

They have history, reputation, symbolism and psychological value.

And that’s why the best luxury firms can have extreme pricing power.

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Personally, I’m most interested in Ferrari.

In my view, Ferrari is not a typical carmaker.

It’s a luxury brand, a status symbol and an extremely scarce product.

A regular carmaker often has to compete on volume, discounts, costs and cycles.

Ferrari plays a different game.

It produces fewer cars than it could sell.

It artificially maintains scarcity.

Customers often wait.

Personalization increases margins.

And the brand is so powerful that people don’t just buy a car, they buy a dream.

That’s a huge difference.

If Ferrari’s stock drops significantly just because of weaker sentiment around luxury or short-term uncertainty, it’s a company I want at least on my watchlist.

It’s not cheap.

But the best luxury brands usually never look cheap at first glance.

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LVMH is a completely different type of luxury story.

It’s the world’s largest luxury conglomerate.

Louis Vuitton, Dior, Tiffany, Moët, Hennessy, Sephora and many other brands.

LVMH’s advantage is diversification.

You don’t buy a single brand.

You buy the whole luxury ecosystem.

Fashion, handbags, jewelry, spirits, cosmetics, retail.

When one part does worse, other segments can compensate some of the pressure.

On the other hand, precisely because of LVMH’s size, the question is whether it can grow as quickly as in the past.

If the Chinese consumer doesn’t return stronger and margins remain under pressure, the market may remain cautious toward LVMH for some time.

But in the long term I still think it’s one of the highest-quality luxury businesses in the world.

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Hermès is perhaps the highest-quality luxury company of all.

An extraordinary brand.

Extreme scarcity.

Extreme pricing power.

Bags like the Birkin or Kelly are more than just products.

They are symbols of status and limited availability.

In my view, Hermès has one of the purest moats in the entire luxury sector.

The problem is valuation.

The market knows Hermès is an exceptional company.

And that’s why it often values it very highly.

Even if the stock falls, it may still not be cheap.

So with Hermès I wouldn’t just look at the percentage decline from the peak.

I would mainly look at whether the valuation finally provides a sufficient margin of safety.

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Richemont is mainly interesting because of its jewelry.

Cartier.

Van Cleef & Arpels.

Buccellati.

These are very strong brands.

And jewelry, in my view, is one of the most resilient parts of luxury.

Richemont has recently shown that jewelry can grow even when the entire luxury sector isn’t in perfect shape.

That’s interesting.

Jewelry has different dynamics than fashion.

They can be less cyclical, more timeless and more tied to a wealthier clientele.

That’s why Richemont seems to me like a higher-quality luxury story than some weaker fashion houses.

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Kering, in my view, is the biggest turnaround story in this group.

Gucci used to be the growth engine.

Now it’s more of a problem that the market punishes.

Kering can be cheap.

But cheap doesn’t automatically mean good.

This isn’t just about bad sentiment for a quality business.

It’s also a question of whether Gucci can truly turn around.

If yes, the upside could be large.

If not, the stock may remain cheap for a very long time.

That’s why I wouldn’t view Kering the same way as Ferrari, Hermès or LVMH.

Kering is more of a risky turnaround.

Not a pure compounder.

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My personal hierarchy of the luxury sector would look like this:

1️⃣ Ferrari – the most interesting brand/scarcity play

2️⃣ Hermès – the highest-quality luxury moat, but often expensive

3️⃣ LVMH – the best diversified luxury conglomerate

4️⃣ Richemont – a strong jewelry business

5️⃣ Kering – a turnaround with higher risk

If I had to pick a company that best fits my investment philosophy, I’d probably watch Ferrari and LVMH the most.

Ferrari because of brand strength, scarcity and extreme pricing power.

LVMH because of diversification, the quality of its brand portfolio and its long-term ability to survive weaker cycles.

Hermès may be the highest-quality business, but for me the main question there is valuation.

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Why might luxury be interesting now?

Because expectations are no longer overly optimistic.

A few years ago the market felt that luxury would grow almost without pause.

China was strong.

Wealthy customers were spending.

Margins were high.

Stocks were trading at premium valuations.

Today the mood is different.

Investors are more cautious.

China is an unknown.

Growth has slowed.

Valuations have fallen.

And it’s precisely at moments like these that I think it’s worth starting to watch quality brands.

Not because the bottom has to be right now.

But because the best buys often happen when a quality company temporarily looks less attractive.

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However, risks should not be ignored.

Luxury can stay weak longer than you think.

If the Chinese consumer remains under pressure, the whole sector will feel it.

If the global economy worsens, the aspirational customer may cut back on spending.

If tariffs or currency pressures arrive, margins may suffer.

If a brand starts to stretch too much and loses exclusivity, it can damage its moat.

And if you buy even a quality company at too high a valuation, the return may not be good.

That’s why I wouldn’t buy luxury blindly.

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My point is simple:

The luxury sector today is not without risk.

But that’s precisely why it’s becoming interesting.

The best luxury firms have something that’s very hard to copy:

a brand, history, status, scarcity and pricing power.

And if these companies temporarily fall due to weaker sentiment, it can be an interesting opportunity for a long-term investor.

Not all companies in luxury are the same.

Ferrari is not Kering.

Hermès is not ordinary fashion retail.

LVMH is not an ordinary consumer company.

And that’s why you need to differentiate.

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My current luxury watchlist:

🔹 Ferrari

🔹 LVMH

🔹 Hermès

🔹 Richemont

🔹 Kering

Of these, I’d personally watch Ferrari and LVMH the most.

Ferrari as a pure scarcity/brand play.

LVMH as a diversified luxury giant.

Hermès as the highest-quality but often the most expensive business.

Richemont as a strong jewelry compounder.

Kering as a riskier turnaround.

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Conclusion?

While many investors today chase AI, chips and tech momentum, I try to also look where sentiment is weaker.

The luxury sector is exactly that kind of area.

It’s not automatically cheap.

It’s not without risk.

But with the right company, the right price and a long horizon it can be a very interesting space.

Top luxury brands don’t just sell a product.

They sell status, emotion and scarcity.

And that’s a moat that can’t be easily copied.

This is not investment advice. It’s just my personal view on the luxury sector and why I’m currently following it