|
Proprietary Data Insights Top Luxury Goods Stock Searches This Month
|
|||||||||||||||||||||
A Warning For ETF Investors |
In Trackstar, our proprietary sentiment indicator, all of the luxury goods stocks you see above are also consumer cyclical stocks. While we also give Tesla (TSLA) the broad consumer cyclical designation, Trackstar doesn’t classify it as a luxury stock. Rather, it’s an auto manufacturer. Tough to argue with that, though companies such as Tesla can easily fit into multiple subsectors. This brings up an area of caution for ETF investors. Is Tesla Really A Luxury Brand? As we have written, in an effort to grab market share, Tesla has made a few price cuts over the last several months. In a blog post about passive versus active ETF investing, Tema ETFs argues this means you can’t really consider the company a luxury brand. Yet, Tesla makes up roughly 5% of the S&P Global Luxury Index, a benchmark commonly used by ETFs focused on the luxury sector. Tema argues that Tesla, as well as Diageo (DEO), Nike (NKE) and Lululemon (LULU), are mass consumer names rather than core luxury brands so why are they part of an index that tracks luxury stocks? Tema draws an important distinction between luxury and consumer brands: At their core, luxury goods are about scarcity, craftmanship and aspirational desirability. Unlike consumer goods, luxury goods are typically less demanded for their functionality and rather more desired for their perceived exclusivity and quality. So Ferrari, which has a history of raising prices amid relatively low supply, is a luxury brand. Tesla, whose Model Y is less expensive than the average car in America, is not. Why Does This Matter? As we see it, it matters from several standpoints. First, if you want heavy exposure to TSLA, you can just buy the stock or any number of index funds that are not sector specific. For example, Tesla accounts for roughly 3.0% of the Invesco QQQ Trust (QQQ), which tracks the performance of the Nasdaq’s Second, as Tema points out as it argues for its active management approach, there’s “wide dispersion of share price returns between companies” in the luxury space. Therefore, you need a manager who can stock pick and give you exposure to the winners while weeding out the losers as well as non-luxury brands still deemed as such by broad indices. Only Time Will Tell For Tema Sensible argument. And definitely one to consider if you believe strongly in a sector such as luxury and want pure, focused exposure via an ETF. In this case, we can only wonder if Tema will end up putting its (or your) money where its mouth is. Tema only launched its actively-managed Tema Luxury ETF (LUX) a couple weeks ago. Since inception in mid-May, it’s down roughly 4.0%. For reference, an ETF that passively tracks the S&P Global Luxury Index, the Amundi S&P Global Luxury UCITS ETF (LUXU), is down about 4.5% since May 11. For the record, the S&P Global Luxury Index is up approximately 23.4% over the last year. Also, for the record, a look at LUX’s top ten holdings and their weighting:
If you buy Tema this early on, you’re buying pure-play luxury as much as you’re buying Tema’s view of the world. The ETF world. One that’s increasingly becoming more thematic and actively managed. The Bottom Line: The Juice thinks this might be one of the most fascinating areas of investing to watch. The whole passive versus active ETF space. So we’ll keep following it and putting ideas, such as LUX, and investment approaches, such as Tema’s, in front of you. Next week, we’ll go from broad, index-tracking ETFs to passive and active sector specific ETFs to build a sample ETF portfolio to consider if you’re a long-term investor seeking diversification via a broad array of funds. |
|
News & Insights |
Freshly Squeezed |
|
Want to get content like this directly to your inbox? Then we urge you to sign up for our newsletter here |