Appealing Snob Investments

Here are four ways to cash in on the upscale crowd.
Author:
Publish date:

Especially in times of economic uncertainty, I lie awake at night thinking about my investments. Worrying? Yes, to a degree. But worrying doesn't accomplish much except to prolong my sleeplessness. So I play "what if?" games instead.

What if consumer debt catches up with us, and we really do slide into a recession? What if recent job gains, supported by construction, retail and health care, prove illusory? What if some natural or man-made disaster happens? What if gas goes to $5 a gallon?

I worry the debt issue might come home to roost. I also worry about rising energy costs and jobs supported by borrowed money and government outlays.

OK, where am I going with this? Simply put, as a

Millionaire Zone

investor looking for steady growth and stability, right now I'm looking for companies that cater to upscale shoppers.

Why? It's simple: What worries me the most doesn't affect them as much. I believe true luxury shoppers -- not just aspirational high earners but the truly wealthy -- will keep on spending.

Investing in luxury plays offense and defense at the same time. It's defense because the sector is less economically sensitive, and offense because I really do see growth potential, especially internationally.

Think I'm crazy? Just look where the smart money is going.

One by one, upscale marquees are disappearing from the investing landscape.

Four Seasons

(FS)

is being taken private by an investment consortium led by Bill Gates and a Saudi prince. Texas Pacific and Warburg Pincus acquired

Neiman Marcus

in 2005.

Gucci

was bought by an investment consortium in 2004. Is there a pattern here?

We're left with very few pure plays. Sure, I like

Tiffany & Co.

(TIF) - Get Report

and made

favorable comments about it just before a recent 20% stock price run-up. And you might look at

Sotheby's

(BID) - Get Report

, too. Both are good, but are pretty expensive right now.

Click here for the video version of this story from Jennifer Openshaw.

So here are four picks in my investment store window:

  • Louis Vuitton Moet Hennessy. Traded on the Paris Bourse, LVMH has become the largest of luxury conglomerates, with brands like Guerlain, Givenchy, Kenzo, Tag Heuer and Dom Perignon. It's very diversified -- fashion to leather to perfume to wine and spirits -- but all in the luxury space. LVMH also has a strong multinational distribution and retail network. You'll have to work with your broker to buy shares, as there are no ADRs traded on American exchanges. Still, LVMH makes a good international play for the individual stock picker.
  • Burberry. Sticking with the overseas theme, Burberry is the purveyor of the well-known and elegant tartan. Traded on the London Stock Exchange, Burberry makes the most of its elegant British style, and I see it as a good takeover candidate as famous high-end brands continue to consolidate.
  • Marriott International (MAR) - Get Report. This brings the idea closer to home. Marriott has an interesting and dynamic corporate history, and is slowly and steadily moving up the food chain into luxury segments.Once known as a midscale restaurant operator with such brands as Hot Shoppes and Howard Johnson's family restaurants, Marriott began its climb by spinning off the food operations (Host Marriott in 1993 and Sodexho in 1998). The 1995-to-'98 purchase of Ritz Carlton signaled a transition toward upscale properties, as did the sale of Ramada Inns in 2004.Today, Marriott operates some 135 luxury resorts and 90 full-service spas worldwide under several brands. Even the "limited service" hotel brands like Residence Inn and Courtyard by Marriott have business travel cachet. The latest push into luxury fractional and time-share ownership is impressive, led by the Ritz Carlton Club and Residences and the Marriot Grand Residence Club.
  • Trex Corporation (TWP) . What? A company making composite decking and other building materials? Trex is my dark horse, and here's why. Its high-end decking lines give a beautiful, relatively maintenance-free finish well suited for upscale homes -- its tropical hardwood Brasilia line in particular.As the wealthy retire and upgrade their primary or vacation homes, my crystal ball sees a lot of Trex products in these back yards. Recent earnings disappointments and general concerns about the building materials industry have kept this stock cheap, but I believe it's a good buying opportunity.

Yes, the "what if?" games keep me lying awake at night, too. But having answers is better than aimless worrying, and investing toward the top end of the economy is an answer that makes sense to me.

Jennifer Openshaw, a passionate advocate for helping Americans improve their finances and build their personal fortunes, is CEO of

The Millionaire Zone and America Online's personal finance editor. In addition to appearing regularly on TV shows such as "Oprah" and "Good Morning America" and on CNN, Openshaw is host of ABC Radio's "Winning Advice" and serves as an adviser to some of America's top corporations. Her new book,

"The Millionaire Zone," hit bookstores in April 2007.