About: Based in Paris, LVMH is the world’s premier luxury goods company. It’s activities and major brands include wines & spirits (Moët & Chandon, Hennessy); Fashion & Leather Goods (Louis Vuitton, Christian Dior, Celine, Fendi); Perfume & Cosmetics (Parfums Christian Dior, Guerlain); Watches & Jewellery (Bvlgari, Chaumet, Tag Heuer, Hublot); and Selective Retailing (Sephora, DFS). LVMH sells primarily through its own retail stores, controlling price, availability and the customer experience.

Why it’s in the portfolio: Revenue has grown at an organic rate of 8% p.a. over the last decade and by 11% in 2018. The business has operated at a high level of profitability with remarkable consistency, earning an EBIT margin of around 16% over the last 10 years. The company has allocated capital sensibly though periodic acquisitions, with the largest being Christian Dior Couture, which was purchased for €6.5 billion in 2017, though other deals have typically been less than €1 billion.

Fundamentals: MC has a market cap of $197b USD, a PE of 29.7x forward earnings, EPS of 14.6x forward earnings and a PEG ratio of around 2.4. The company currently has a 1.6% dividend yield and a 47.5% payout ratio. The company’s debt to assets are currently 14.8% and debt to equity is 34.2%.

What could go wrong?