Stockholm (HedgeNordic) – HCP Focus, a concentrated equity fund managed by Helsinki Capital Partners, has refreshed its portfolio of 12 companies as part of an “autumn cleaning.” The portfolio management team exited two existing positions and added three new holdings, two of which – Ferrari and Hermès – benefit from the luxury megatrend.
HCP Focus maintains a concentrated equity portfolio of around 12 holdings that seek to capitalize on megatrends, large or small, that are shaping the world. One of these is the luxury goods megatrend, which reflects the rising demand for high-end products driven by an expanding base of wealthy individuals. “One thing that makes luxury product manufacturers interesting from an investment point of view is that their customer base is generally quite immune to fluctuations in economic cycles compared to the average consumer,” says Pasi Havia, portfolio manager at Helsinki Capital Partners.
“One thing that makes luxury product manufacturers interesting from an investment point of view is that their customer base is generally quite immune to fluctuations in economic cycles compared to the average consumer.”
Despite its reputation for stability, the luxury market is subject to volatility from year to year, with economic and political trends influencing luxury consumption, particularly among younger generations like Gen Z and mid-tier luxury buyers, who contribute significantly to luxury sales. However, as Havia notes, “a fundamental change occurs when moving to the ultra-luxury side, in terms of luxury products and their customer base.” According to the portfolio manager, “ultra-luxury is often timeless, so expensive and exclusive that it is beyond the reach of the merely wealthy. While ordinary luxury is swayed by fashion and different seasons, ultra-luxury is less prone to unpredictable consumer behavior.”
“Ultra-luxury is often timeless, so expensive and exclusive that it is beyond the reach of the merely wealthy. While ordinary luxury is swayed by fashion and different seasons, ultra-luxury is less prone to unpredictable consumer behavior.”
When seeking ultra-luxury brands, Havia points to Europe, which enjoys a deep-rooted tradition of luxury craftsmanship. “The United States, as a relatively new country, lacks the kind of long traditions that the creation of luxury companies requires,” says Havia. While only a few brands such as Ralph Lauren and Tapestry stand out in the U.S., Europe’s long-standing tradition makes it the heart of luxury. The team behind identified and analyzed twenty listed luxury companies, including LVMH, Kering, EssilorLuxottica, Moncler, Prada, Richemont, Burberry, and Capri, to name a few.
Having exited positions in Match Group and Fiverr, which had thrived during the pandemic, the team added two ultra-luxury players to its portfolio. “Match and Fiverr were both successful during the COVID era when people were isolated at home,” Havia explains the rationale behind selling positions in Match Group and Fiverr. “Online dating and earning various extra income through platforms like Fiverr flourished. Since then, the share price ride has been cold and dark clouds have gathered over both companies,” he continues. In their place, the team opted for Ferrari and Hermès, two brands characterized by extreme exclusivity.
“You can’t walk into either store with a wad of bills in your hand and immediately leave with a new Birkin bag or a Ferrari 12Cilindri.”
“In our luxury megatrend selection, we finally ended up with two ultra-luxury companies, both of which are united by the fact that they sell scarcity, and in order to buy their most desired products, the customer had to prove his loyalty and suitability to the brand,” concludes Havia. “You can’t walk into either store with a wad of bills in your hand and immediately leave with a new Birkin bag or a Ferrari 12Cilindri.”
