Invest With Luxury as it Continues to Lead

Investors remain bullish, even as inflation remains stubbornly high. One sign that investors are content is with the spending on luxury goods. These areas don’t see as much of a drop during a recession, and during a boom they can fare quite well.

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  • Luxury trends show that we’re still in the boom. That’s good for most stocks trending higher today. It also means companies catering to high-income customers should continue to go on a tear.

    High-end retailer Williams-Sonoma (WSM) just soared following an earnings beat. They also raised their dividend and increased their share buyback, two signs of a company with strong cash flows.

    The news sent shares soaring, and they’re now up over 100 percent in the past year.

    But with Williams-Sonoma trading at just 16 times forward earnings, there’s more room for big returns ahead.

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  • The company is also coming off a rougher year, so the year-over-year financials will start to attract momentum investors in the coming quarters.

    Action to take: Williams-Sonoma shares are in an uptrend, and worth buying as a momentum play on luxury retail now. The recent dividend increase pushes the dividend yield up to 1.5 percent.

    For traders, the August $300 calls, last trading for about $24.50, could see mid-double-digit returns on a further push higher in the next five months.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.

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