A New Index Tracks The 1% Of Luxury Stocks

There is a luxury stock bubble, and it is pulling away from 99% of the market.  It sees an opportunity at Birinyi Associates. 

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LVMH is the world's largest luxury company.  Stock prices have broken out to historic highs following its recent earnings report. 

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LVMH Revenue

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Clothing/leather goods:  +18%

Jewelry/watches:             +11%

Exclusive Retail:               +30%

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Globally, sales increased by 24%, with Japan leading by 34%. 

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A number of other brands reported strong results as well, including Christian Dior, Moncler, Richemont, and Hermes. 

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Wall Street has taken note of the "1%" crowd's continued spending power. 

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Jeff Rubin at Birinyi Associates said in a note to clients Wednesday that inflation has taken a significant toll on all consumers over the past year, from rising egg prices to sky-high apartment rents. 

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The one-percenters have been relatively immune to inflation, however.

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A couple of new indexes have been created by Rubin and Birinyi to monitor all this money: the 1% Index, which includes 16 luxury stocks, and the 99% Index, which includes 18 stocks that are more relevant to the average person. The local currency market cap is used to weigh the indexes. 

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The index based on the 1%:

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• LVMH
• Ferrari
• Moncler
• Brunello Cucinelli
• Burberry
• Hugo Boss
• Richemont
• Tapestry
• EssilorLuxottica
• Kering
• Christian Dior
• Mercedes-Benz
• Porsche
• PRADA
• Hermes
• BMW

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The index based on the 99%:

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• Levi Strauss
• Big Lots
• Fast Retailing
• Walmart
• Hershey
• Bath & Body Works
• Gap
• Hormel Foods
• H&M
• Target
• Anheuser-Busch
• Hanesbrands
• Ford
• Ralph Lauren
• Gildan
• General Motors
• Foot Locker
• Dollar Tree

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 It's no surprise that luxury has outperformed:

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Comparing the 1% vs. the 99%

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1% index:      + 34%

99% index:   + 20%

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The 99%, however, had underperformed in the first half of April, rising only 8%. There has been a comeback for the 99% since the start of April: 

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Comparing the 1% vs. the 99%

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1% index:      + 3%

99% index:   + 12%

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What's going on? Despite slow but steady inflation progress, Rubin believes consumers are benefiting. 

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As a result of lower inflation, Rubin suggested that the dollar could go a little further in stores. 

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Obviously, the next logical step is to monetize the index through an ETF and collect index fees. 

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The plan hasn't been decided yet, but Rubin wouldn't rule out doing so. 

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