How to grow rich... on the fruits of romance
IT MIGHT be more traditional to say it with flowers but investors wanting to make t he most o ut o f Valentine’s Day could build long-term wealth by putting money in companies that do well at this time of year.
Britons spend around £1 billion a year on Valentine gifts and treats – on everything from jewellery to flowers, champagne, hotels, perfume and fashion.
Lee Wild, head of equity strategy at wealth manager Interactive Investor, says: ‘ It rarely makes sense to invest in company shares based s ol el y on t he outcome of annual events such as Valentine’s Day.
‘ But there are plenty of great businesses that do receive a nice boost to profits when romance blossoms and which can represent good long-term investments.’
LUXURY CHOCOLATE BRAND IS TASTY
EVEN the l aziest l over might stretch to splashing out on a box of chocolates on Valentine’s Day. Russ Mould, investment director at AJ Bell, says: ‘Chocolate is an easy win when it comes to Valentine’s Day presents and Hotel Chocolat, which is quoted on the London Stock Exchange, has seen its share price increase by more than 50 per cent over the past year.’
He says some smaller companies investment funds have taken a shine to this luxury chocolate brand. For example, Aberdeen Standard Investments UK Smaller Companies investment fund has some three per cent of its portfolio invested in the high-end chocolate maker and delivered an overall return last year for investors of 38 per cent.
If you are looking to invest earlier in the chocolate supply chain, then an alternative is exchange traded fund ETFS Cocoa.
Mould says: ‘This fund provides exposure to the price of the raw material. It tracks the performance of the Bloomberg Cocoa Subindex, moving up and down in line with the price of cocoa, and has climbed 25 per cent in the last year.’
JEWELLERY FIRMS ADD SHINE TO A PORTFOLIO
ANOTHER perennial gift option for Valentine’s Day is jewellery, primarily because the day is the second most popular one of the year to get engaged (after Christmas Day). M&G Global Dividend fund has a holding in Danish jewellery manufacturer Pandora, known for its customised charm bracelets, necklaces and watches. Pandora started as a family-owned shop in Copenhagen but its products are now sold in more than 100 countries on six continents.
Stuart Rhodes, manager of M&G Global Divi dend Fund, s a ys: ‘Despite the operational issues that Pandora has faced, it remains cash generative and has a new management team to stabilise the business and lead its recovery. We believe the shares are cheap.’
Matthew Grimson, manager of investment fund NFU UK Smaller Companies, holds French luxury goods giant LVMH Moët Hennessy Louis Vuitton – owner of more than 70 stellar brands including Bulgari, Louis Vuitton, Fendi, Christian Dior and Givenchy. He says: ‘LVMH is pretty much a Valentine’s Day onestop shop for romantic gifts.’
Although quoted in France, its shares can be bought via most investment platforms.
Grimson also points to Watches of Switzerland Group, the UK’s largest supplier of Rolex, which has its sights set on the US market.
Jason Hollands, of wealth manager Tilney, likes Swiss luxury goods group Richemont which owns Mont Blanc, Cartier, JaegerLeCoultre and Van Cleef & Arpels.
SPARKLING WAY TO BOOST INVESTMENT
IF YOU’RE looking to celebrate an engagement, wedding, the lasting of a long- term relationship, or are just using Valentine’s Day as an excuse to celebrate, then champagne is usually the drink of choice.
LVMH not only owns Moët & Chandon, but champagne brands Dom Perignon, Krug, Veuve Clicquot and Ruinart. It is the second biggest company holding in investment fund GAM Star Continental European Equity. Niall Gallagher, manager, says: ‘About a third or more of LVMH’s customers are from China and the propensity of the Chinese to consume luxury is very high.
‘The number of Chinese people who enter middle-class status will probably expand by between three and four billion over the next decade – that’s an enormous amount of consumers who have a propensity to buy high- end luxury brands, high-end cognacs and champagnes.’ This fund also has a key stake in drinks giant Pernod Ricard that owns champagne brands PerrierJouët and Mumm.
HOTELS AND PIZZA ARE A GOOD BET TOO
OVER the past few years, Valentine’s Day has expanded to ‘Valentine’s weekend’ and so it is all about food and hotels as well as presents. NFU Mutual’s Grimson says: ‘Valentine’s Day has historically been one of the highest grossing sales days in the year for Domino’s Pizza, as couples decide to shun busy restaurants.
‘Domino’s share price enjoyed a nice recovery last year and we hope this trend continues as it looks to discontinue its underperforming international operations and refocus on the pizza-adoring UK and Irish markets – potentially further reinvigorated by the imminent appointment of a new chairman and chief executive.’
Those looking to treat their significant other to a romantic getaway for Valentine’s Day may find themselves booking a hotel stay in one of the many establishments owned by InterContinental Hotels Group – InterContinental, Crowne Plaza and Regent Hotels.
Interactive Investor’s Lee Wild says: ‘Having recovered from fears that the coronavirus would hurt its business, the shares are up 9 per cent over the past year and 43 per cent over five years.’
Competing with IHG in the hotels space is Marriott, a top ten holding of Pictet Premium Brands fund. Its portfolio is described by Shore Capital’s Ben Yearsley as ‘reading like a Who’s Who of Valentine’s Day gift opportunities with LVMH, L’Oréal, Hermes and Marriott among its holdings – and MasterCard and Visa to pay for it all.’
High quality brands, says Yearsley, should be better placed to weather any market volatility caused by the coronavirus. But he warns ‘Valentine stocks’ are often expensively valued, so buyers need to tread carefully.