The 10 Best Performing Luxury Stocks

Happy Sunday!

This week we’re talking big bank earnings, the top luxury stocks from the last decade, and the wild backstory behind Axon Enterprise.

Let’s get to it.

News Roundup

• Amazon’s Shareholder Letter: On Thursday, e-commerce and cloud computing giant Amazon released their annual letter to shareholders. In the letter, CEO Andy Jassy laid out the 5 principles that helps Amazon remain so resilient:

  1. Hire builders

  2. Solve real customer challenges

  3. Build in primitives

  4. Don’t waste time trying to fight gravity

  5. Accept and learn from failed experiments

• JPMorgan Earnings: The largest bank in the United States reported its first quarter earnings on Friday. Revenue and net income results were in line with expectations, but the company’s cautious outlook sent its stock down 7% for the week. JPMorgan guided for higher expenses on deposits for the remainder of the year, which means they’ll likely see some pressure on profit margins. In addition, CEO Jamie Dimon had some glum words about his outlook on the economy “We have never truly experienced the full effect of quantitative tightening on this scale. We do not know how these factors will play out”.

• Spotify to Help Make Remixes: Reports came out this week that audio streaming giant Spotify is exploring adding new tools that will allow their users more easily edit and mash-up existing songs. Many younger users already do this on their own, but Spotify’s solution would actually help drive revenue back to the artists and rights holders of the original songs. This appears to be yet another move in Spotify’s ambition to become a more holistic audio platform for both creators and listeners.

• Rent the Runway Jumps 300% in 1 Week: Rent the Runway, an online commerce platform that lets customers reserve designer apparel, caught investors off guard this week with better than expected 4th quarter results. After going public in 2021 at a market cap of $1.2 billion, its stock has since declined by more than 90%. However, after guiding for break even profitability next year, analysts seem to think the ~$300 million revenue business might actually have some legs. Rent the Runway’s stock was up more than 300% this week.

Company Spotlight

Axon Enterprise

In 1993, Rick and Tom Smith founded TASER International in a garage in Tucson, Arizona.

30 years later, that company generates $1.6 billion in revenue and counts 95% of US law enforcement agencies as customers.

Here's the wild story behind Axon Enterprise:

Founding - The original "TASER" was created in 1969 by a NASA researcher named Jack Cover. After failing to drive any significant commercial success, Cover eventually teamed up with Rick and Tom Smith to help bring tasers into the mainstream.

The first several years were difficult including several failed product launches and a near bankruptcy experience, but it finally found success with a unique marketing strategy.

TASER International began paying police officers to train others on their products, and before they knew it, their customers became their best salesmen.

With this newfound growth, TASER International joined the public markets in 2001 under the ticker TASR. Since its IPO, the stock is up 55,483% 🤯 making it one of the 10 best performing stocks of the last 20 years.

Expanding the TAM - 4 years after its IPO, the company began selling a camera accessory for its namesake Tasers. This TASER Cam, as it would be known, was designed to automatically turn on when a Taser's safety was disengaged.

With some success here, they followed up with a second camera product called the Axon Pro which was worn by officers and would upload video footage to their online storage system, Evidence dot com.

This camera and digital evidence business found rapid growth after Axon Pro footage was used to exonerate a Fort Smith police officer during prosecution.

The modern business - Today, Axon offers more than 20 different products and services. From training and incident response to reporting and video editing, they have products covering almost all of law enforcement's needs.

Axon buckets its products into 3 revenue segments:

• TASER (39% of revenue)

• Axon Cloud & Services (36% of revenue)

• Sensors (25% of revenue)

Today, 95% of revenue is earned through subscriptions.

Growth - Over the last 15 years, Axon's revenue is up more than 16-fold. Thanks to the company now having a foot in the door with nearly all US law enforcement agencies, much of the growth has come from up-selling existing customers.

This is evident in Axon's ~120% net revenue retention rate.

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Best Performing Luxury Stocks of the Last Decade

It’s no secret that luxury companies can provide wonderful returns for shareholders. Unlike most companies, luxury brands have several distinct advantages.

• Pricing Power: For luxury brands, high prices are a feature not a bug. In general, the higher the price, the more sought after the product.

• Heritage Drives Durability: Many luxury brands have been around for a century or more. The heritage built over decades is nearly impossible to replicate.

• Recession Resilient: Recessions impact socioeconomic classes in different ways. And studies show that in most recessions, the ultra-wealthy see the least impact on consumer spending.

With that in mind, here are the 10 best performing luxury stocks of the last decade.

1.) The Titan Company

Titan is an Indian manufacturer of luxury watches, eyewear, and other jewelry. Over the last decade, Titan has increased its store count more than 6-fold.

• 10-Year CAGR: 31%

• EV/EBIT: 73x

2.) Ferrari  

Though the bulk of Ferrari's revenue comes from auto sales, Ferrari resembles more of an exclusive billionaire's club than a standard car maker. Its restricted supply and long wait list helps drive Ferrari's pricing power.

• 10-Year CAGR: 28.2%

• EV/EBIT: 46x

3.) Hermes

Most known for its famous "Birken Bag", Hermes sells a variety of luxury goods including bags, coats, scarves, and jewelry. Its high-end bags are so sought after that Hermes is quite selective with who they sell to.

• 10-Year CAGR: 26.7%

• EV/EBIT: 41x

Meme of The Week

Amazon’s Not So Automated Grocery Store

In 2016, Amazon launched a new concept that was designed to revolutionize retail shopping as we knew it. That idea was called “Just Walk Out” technology and would allow shoppers at physical amazon stores to bypass the checkout process and instead simply walk out of the store and be charged for the goods they bought.

Online, Amazon said these stores were being driven by computer vision, but last week, reports came out that Amazon was relying on a team of 1,000 remote employees in India to manually review what customers picked up.

According to the reports, around 700 out of every 1,000 transactions had to be manually verified by these workers.