Luxottica (LUXTY-5)

This company is a good one, but sunglasses are a discretionary item. Now is not the time to initiate a position – if you own it, hold.

This company makes eyewear and owns Lenscrafters. He is not a big fan of a company that owns both lens manufacturing and eyewear as they are viewed as competitors by other eyewear manufacturers.

Has merged with Essilor (EI-FP), and is just waiting for EU approval. If interested in Luxottica, you should think of Essilor instead. This merger will give you a gargantuan conglomerate that will dominate pricing. Essilor is not just eyeglasses, 2/3 of Chinese are myopic and in need of reading glasses. With the aging population there is still good opportunity in Essilor moving forward. Dividend growth has been roughly 15% a year, double what the growth rate is on average.

Merging with Essilor (EI-FP), the leading lens producer, and a lot of people view this as very positive, but isn’t sure he feels the same. Luxottica is the parent of LensCrafters, and he wonders why they would do business with their competitor. Prefers Hoya Corp (7741-JP).

He prefers another in the vision space. He likes the vision space, though. There is aging going on in the world. The use of computer screens has lead to more needs for vision correction.

He is positive on this name because of the moats, the amount of capital you would have to create, to take the company on. They’ve been hurt because they’ve had a big expansion on their PE multiple up to 30X, and has come back down again because it is not growing as fast as the analysts want them to. They have very little competition and they are in e-commerce.

Had no idea how dominant their position was, not just in retail eyewear in terms of exclusive retail rights for a lot of brands, but also owning the optical retail locations as well. This is as close to a monopoly as you can be. A phenomenal business and the returns are great. When you have businesses that have to make transitions from the individual to a corporation, you can run into a lot of problems. Great business, but when the management team changed he stopped following it.

We know this through the 6500 retail stores including Sunglass Hut and LensCrafters. They also have the brand names of Ray-Ban and others. Also, they are the exclusive licensed supplier and distributor of Google Glass, and have just signed a deal with Intel to do work on smart glasses with Oakley. Underneath all of that there is a demographic wave of us getting older and needing glasses. A beautiful name and low volatility. Dividend yield of 1.2%.