Investing in Love
There were at least two Saints Valentine, one of whom was certainly executed around Feb. 14, 269 A.D., and canonized some 200 years later. More intriguing was the Roman antecedent of the day, the Feast of Lupercal, in which Latin maidens were flailed with strips of wolf fur, a practice believed to promote fertility that somehow evolved into the custom of giving hearts, candy and gifts of affection. We first picked our Valentine’s Day investments for Hilton Head Monthly in 2006, seven years ago, for those who would prefer to give (or receive) shares rather than, say, candy or flowers. Let’s see how our gifts fared, whether the investments have lasted longer than the candy and flowers, and what might lie ahead.
Gold turned out to be the shiniest gift of all, although we were somewhat cautious when we first wrote about it in 2006. Gold had just reached a twenty-five year high of $541 an ounce, and many pundits were predicting a sharp decline. Well, safety-conscious investors concerned about a collapsing global economy drove the price sky high through 2012, reaching a stratospheric $1,801 an ounce in February of last year. The price has now settled down to around $1,650 an ounce, still giving the recipient an annualized gain of 17.27 percent.
Tiffany’s seemed like a natural choice in 2006; after all, almost every desirable Valentine’s Day present save candy can be found at this high-end Manhattan jewelry store. TIF has grown from its landmark 5th Avenue store to a global jewelry conglomerate, with 240 boutiques throughout the United States and abroad, and a strong mail order and Internet business. While our stock certificate didn’t arrive in the signature white-ribboned blue box, its value has grown more than anything that did. Now selling at approximately $62 per share, $22 above its $40 ($32.90 adjusted for dividends) price seven years ago, Tiffany’s shares have enjoyed an annualized gain of roughly 9.5 percent. The stock pays a $1.28 dividend, giving a yield of just over 2 percent, and has increased the dividend each year.
We also suggested shares of Hershey (HSY), the Pennsylvania chocolate company, as a sweet alternative to candy; with 43 percent share of the domestic chocolate market, and more than 80 brands sold in 70 countries, it seemed a great gift. Over time, though, the idea seemed to melt down a bit. Hershey’s was selling at $55 in February 2006 ($42.67 adjusted for dividends); today it’s priced at $73.90, for a total return of 4.3 percent per year over the seven years, a somewhat bitter bon-bon. The dividend, averaging around 2-3 percent per year, was the sweetest sugar in this gift.
We’re going to stick with these two companies for another year. They have both held up pretty well through a global recession, and their dividends make them a gift that keeps on giving. As far as gold, though, we’re ready to trade in our precious metal this year for shares of LVMH Moet Hennessey Louis Vuitton (LVMUY.)
They are a global retailer and manufacturer of luxury goods, wine and spirits, sold at over 3,000 stores worldwide. LVMH Moet Hennessey Louis Vuitton is headquartered in Paris, where they apparently believe in adding as many of your brands as possible into your company name. Fortunately they didn’t include them all; they also own Dom Perignon, Veuve Clicquot, and Glenmorangie single malt scotch, as well as offering fashion goods under the Fendi, Donna Karan, Marc Jacobs, and Givenchy brands. The stock has returned 19.8 percent over the last three years; revenues have grown by 11.2 percent per year, and earnings per share have increased by 13.5 percent. LVMUY shares are currently selling for $36.30; they sport a 2 percent dividend yield, and dividends have grown by 14.4 percent per year over the last five years. The company is reasonably valued, and seems well poised to profit from increasing wealth in the developing world. Happy Valentine’s Day! M
Steven Weber, Gloria Harris and Frank Weber are Investment Advisors for The Bedminster Group. The Bedminster Group provides fee-only investment, estate and financial planning services. The information contained herein was obtained from sources considered reliable, and does not constitute tax advice. Their accuracy cannot be guaranteed. The opinions expressed are solely those of the author and do not necessarily reflect those from any other source.