The old adage, the rich get richer while the poor get poorer has stood the test of time and for the most part been accepted as an unfair reality. While it may be unfair; however, it doesn’t mean there isn’t a way to retaliate. Investing in luxury companies and other entities that tend to be tied into the upper-class could be a boon at this time. To observe the trend, one needs only to refer to the success of American Express (AXP) throughout the recession. American Express, as the favored card of the wealthy, tends to be a bench mark for how they are spending. If the company’s profits, which include a 27 percent rise in second-quarter net income, are any indication, it appears they’re spending a lot. That said, capitalizing on this revelation seems simple: investments in both on the card they’re using to charge items and the luxury brands and items they’re buying with it.
1) American Express (AXP)– American Express has exhibited a trend in growth that few analysts expect to ebb anytime soon. Card member spending reached an all-time high on broad-based strength, up 18 percent. It’s worth noting that the stock is nearing its 52-week high on the results, but they appear to be moving into a higher price range that they could be planted in for some time.
2) LVMH Moet Hennessy Louis Vuitton (LVMUY)-Louis Vuitton is the leading luxury goods company worldwide. It’s a safe bet for capitalizing on wealth disparity trend largely because of how diversified it is as a company. It’s divisions; wine and spirits, fashion and jewelry, retail and cosmetics mean share prices are less dependent on the success of a single brand. Instead LVMH is a powerhouse containing multiple luxury brands including Marc Jacobs, Louis Vuitton, Hennessey, Sephora, Christian Dior, De Beers, Donna Karan, Dom Perignon, and Tag Heuer. Each of these companies is a major player and its respective field, meaning that if people are spending on luxury items, these names will thrive. That said, the manner in which people are becoming wealthy will also contribute to the success of LVMH. The rising wealth in Asian nations, where there is a growing emphasis on brand names will help continue to boost the stock.
3) Tiffany & Co. (TIF), the company that is known as the crème-de-la-crème of diamonds is, alongside the number of millionaires, on the rise. The ritzy jewelry retailer was up nearly 12 percent in June and submitted double digit growth-projections for both sales and earnings. Tiffany’s is trading at more than double it’s 52-week low, meaning the stock is expensive, but it could be argued that with higher sales and increased earnings, the current price is worth it. The rising growth is not limited to the U.S. and higher sales overseas, especially in Asia could help this company expand well beyond its current levels. The little-blue box is notorious worldwide and an increasingly consumer driven societies in developing nations would seem a sufficient driver of sales for an iconic brand such as this. Sales are expected to be 15.90 percent higher for 2011. Earnings for the company are projected to grow by 21.20 percent this year and 14.60 percent in 2012 with the upward mobility continuing for the next five years.