This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Are Luxury Stocks Really A 'Defensive Play'?

James Dennin, Kapitall: Luxury stocks have been known to outperform when economic times are bad. How could that work?

It seems pretty counter-intuitive. Luxury goods are the ones that we imagine would be more expensive. So wouldn't they be the first thing to go when families tighten their budgets during harder times? 

Well, not exactly.

It often works in the opposite way. As Bloomberg columnist Gary Shilling explains, consumers are always going to try and get the best things they can afford. And when they have less cash, they tend to buy fewer, but more expensive goods. Luxury companies are by their very nature high-margin, low volume businesses. 

[Read more from Kapitall: Retail Comeback: Will These Retail Stocks Become Turnaround Stocks in 2014?]

No one is going to buy 40 Coach (COH) handbags in their whole life, much less a single year. So an economic climate where consumers are all buying fewer, better goods is precisely what these firms like to see. 

If you're bearish on 2014, or hesitant about whether the stock market can continue its upward trend without a more tangible recession, you may be looking to add some defensive plays to your portfolio. So we decided to look for some luxury stocks that might be worth investigating.

To do that, we decided to look for stocks with encouraging inventory turnover trends. These happen when a company sells off more of its product than it expected to, leading inventory to decline as a percentage of net assets. This often indicates growing efficiency and increased demand for the goods which the company is selling.

Starting with a list of 30 S&P 500 stocks that sell luxury goods, we were left with 4 companies on our list. 

Click on the interactive chart to view data over time.

1.Carnival Corporation (CCL):Operates as a cruise and vacation company. Market cap at $30.61B, most recent closing price at $39.09.

Revenue grew by 2.21% during the most recent quarter ($3,658M vs. $3,579M y/y).

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,096.01 -17.53 -0.10%
S&P 500 1,988.47 +4.94 0.25%
NASDAQ 4,475.9390 +19.9230 0.45%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs