Stan Wong Kering PPRUY-OTC TOP PICK Mar 31, 2023

The Asian middle class is driving all of this and those numbers are still mushrooming. GUCCI is the fastest growing of all the major brands and is 60% of KER-EPA. It is trading at a much cheaper multiple than other companies with better growth going forward. He expects 35% earnings growth over the next two years.

(A Top Pick Jan 30/20, Down 2%) A major brand under them is Gucci. They were surprisingly not hurt last year due to switching to online efficiently. Revenues also held up well since people spent their travel budget into luxury goods. Their strength is picking up tired brands and then rejuvenating them. Great cashflow with a bullet proof balance sheet. They will make more acquisitions of brands that are cheap and invest in them. A cheap grower.

Spectacular job of turning around tired brands, such as Yves St Laurent. No net debt. Expects double-digit revenue growth. Shares are down because of China locking down, plus unrest in Europe, creating a great opportunity to step in. (Price target in Euros.) Yield is 2.15%. (Analysts’ price target is $77.61)

(A Top Pick Apr 06/22, Up 1%)

China closing up caused a drop in sales but it is re-opening and the Chinese people are huge buyers of luxury goods. It has big growth ahead and lots of free cash flow. It is also very good at turning brands around.

(A Top Pick Mar 31/23, Down 38%)

Slowly Gucci sales have hurt and guidance is weak. He exited. Not sure what the future holds. Gucci has sales trouble.

(A Top Pick Oct 20/23, Down 38%)

The problem is that Gucci continues to underperform; they changed designers. Has huge free cash flow, a good balance sheet and pays a 5.5% dividend. Disappointing.

The luxury market has been weak after the post-Covid boom. Chinese consumers are a major factor. Plus, their Gucci brand wasn't resonating with consumers. Their designer tried to make the brand more into leather goods and classic fashions, but that isn't what Gucci is about. They have a new designer, so he sees upside. Long-term, he likes luxury goods for being stable and an oligopoly. It trades at 17x PE forward where mid-20s is the norm, so there's room here.

(Analysts’ price target is $22.60)