October 13, 2022

Swatch - a safe bet among luxury stocks

Swatch - a safe bet among luxury stocks

Luxury stocks have always been considered a safe investment and it may be a good time to buy as the prices have just started going up again after the pandemics recession. That’s why it isn’t surprising we saw Swatch in the first place of our personalized Top 10 list for our European and Swiss users, all with amazing Obermatt ranks - Combined rank being 98 and rather cheap for the industry at Value Rank of 82 (less expensive than 82% of comparable investments).

Owning a staggering 18 luxury and everyday watch and apparel brands, The Swatch Group itself holds around 35% of all Swiss watches exports. This means they are a reliable Swiss brand asset while democratic Switzerland enjoys a stellar reputation worldwide, especially now again with all the political instability that authoritarian regimes bring to the world. On top of that, they are not only diversified with different brands, but also with their electronics businesses.

PRO: The following three points speak for a buy:

  1. All good Obermatt consolidated ranks: cheap and safe with a rather steady growth. This in addition to a long serving CEO who ranks in the top five of the long term Obermatt CEO rankings.
  2. It is still a good time to buy luxury, as luxury stocks have started going up again after the pandemic and luxury stocks are usually inflation proof.
  3. The company itself is rather well diversified making it a safe investment.

CONTRA: The following three points argue against it:

  1. Low Revenue Growth rank - may mean lower returns in the future. This may stem from the exposure to China which is trending down recently and may well continue to do so.
  2. Luxury brands need to adapt to the future in the times of digital revolution. On the other hand, who wants to adore their bodies with bland technology? It was new for a while but that newness is about to get boring. It already seems that Swatch had a quick recovery after Covid, meaning they may already be in a good position to sell goods when challenged.
  3. Swatch is run by a small team of insiders that would easily be considered dictators if they were in politics. That doesn't mean, it is bad for business but succession planning is opaque to say the least. What comes after Nick Hayek? That's a big question.

The PRO points clearly outweigh the cons for Swatch and that’s why we decide we buy it for the Obermatt Wikifolio.

Meanwhile, the Obermatt ranks became even better. We have eliminated inflation and different tax rates from all ranks and are now working with expectations for financial performance for many of the companies we cover - data backed by analysts not yet available in the companies’ financial reports. Our premium subscribers get all data and stock updates earlier and also get personalized Top 10 updates - make sure to benefit from it.

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