How Bernard got into the club of the rich …


There are 2,755 billionaires on earth, according to Forbes.

But only four are wealthy enough to qualify as “hundred billionaires” – worth $ 100 billion or more.

Amazon founder Jeff Bezos is # 2.

Tesla’s Elon Musk sits in the 3rd in law…

Microsoft founder Bill Gates is No.4.

But # 1 will probably surprise you.

This is not the super-investor Warren Buffett. It’s not Facebook CEO Mark Zuckerberg.

He is not a Russian hedge fund manager, banker, or oligarch.

The richest person in the world is a Frenchman who sells handbags for women …

On Monday, Bernard Arnault’s personal fortune stood at $ 186 billion.

If you don’t know the name, Arnault is CEO of the luxury empire LVMH (LVMUY)– better known as the parent company of Louis Vuitton. He also owns $ 116 billion from fashion giant Christian Dior.

Bezos and Gates have made their fortunes “the normal way”, developing breakthrough products that hundreds of millions of people use every day. Eight out of ten computers work with Microsoft software. Over 100 million Americans subscribe to Amazon’s Prime delivery service.

Elon Musk follows this path by pioneering high performance electric vehicles.

Arnault was enriched in a completely different way. He has built super luxury brands like Louis Vuitton, Givenchy, Hublot and Dom Perignon.

A prestigious brand is a powerful thing. An unnamed handbag from Target can cost $ 100 – the maximum. But women are lining up around the block to hand over $ 5,000 for a Louis Vuitton.

LVMH’s activity is booming. Sales have jumped 50% in the past four years and its share has jumped 380% since 2016, making Arnault the club of hundred billionaires.

Gucci is booming too …

Like Louis Vuitton, Gucci is a super luxury brand. If you want a pair of Gucci sneakers, be prepared to drop at least a thousand dollars.

It might seem silly to spend the equivalent of a small mortgage payment on shoes, but Guccis are flying off the shelves. Profits from its parent company, Kering (PPRUY), have more than doubled in the past four years.

Kering’s stock is on fire. It has jumped 445% in the past five years, overtaking Amazon and Microsoft in the same period.

But Stephen, what about the “retail death?”

You know all about how online disruptors like Amazon are bankrupting regular stores.

According to leading research firm Nielsen, more than 30,000 stores have closed in recent years.

Yet the disruption online has not hurt sellers of luxury goods at all. Super luxury companies have proven to be totally immune to the Internet wrecking ball. A recent study by the “Big 4” accounting firm Deloitte found that luxury retailer sales have more than doubled in the past five years!

Instead, it’s the middleman retailers that are being crushed.

Toys “R” Us … Sears … JC Penney … Borders … Circuit City … and RadioShack are all bankrupt.

Meanwhile, many other mediocre retailers are barely hanging on to life. Despite his recent run, Macy’s (H) the stock has been cut in half over the past five years. Owner of the shopping center Simon Real Estate Group (SPG) collapsed by 40% over the same period.

These disrupted stores made a mistake from which there is no going back …

They tried to be everything for everyone.

The “department store” business model used to work well. Open a department store, selling everything from blouses and outdoor grills to video games. As long as the store was located in a place where there were enough people, such as a city or a mall, it could do good business.

Those days are long gone. Internet shopping blew up non-specialty, “middle of the road” stores.

Meanwhile, low-end discount stores are doing very well …

According to Deloitte, discount store sales have grown 60% over the past five years.

General Dollar (DG), for example, is the largest chain of US dollars. You could have tripled your money on its stocks in the past four years:

Dollar General is now the largest retail chain in the United States in terms of number of stores. It operates nearly 17,000 stores, more than McDonald’s, Starbucks or Walmart.

Revenues have increased 150% over the past decade. And it’s not just low-income people who shop there. According to JP Morgan, households earning between $ 50,000 and $ 75,000 per year are the fastest growing Dollar General customers.

The digging of the “middle” is a disruptive theme that reverberates in many industries …

Where will he strike next?

Longtime RiskHedge readers know robotaxis will disrupt the auto industry. In fact, automakers have been among the worst performing stocks for years.

Despite a big rebound this year, Ford (F) is still 65% below its 1999 peak. German automaker Volkswagen (VWAGY) trades at the same price as in 2008.

Super luxury automakers are doing very well, however. Sports car manufacturer Ferrari (RACE) the share has provided investors with gains of 280% since its IPO in 2015!

So what should a disruptive investor do with this information?

Avoid “medium” stocks. Avoid mediocre, conventional, or “good enough” companies.

For better or for worse, the middle dies because its lunch is eaten from above and below.

Originally published by Mauldin Economics, 5/31/21


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