Home > Stock Analysis

ROB Your Way Into The Millionaires Club

Posted: Aug 02, 2007 14:27 PM by Matthew McCall

Tickers in this Article: ROB, DCX

If you are reading this article and are interested in the market there must be at least a small portion of you that dreams about hitting it big and sailing on your yacht. For the majority of you, the dream will end when your alarm clock goes off in the morning to tell you it is time for work; however, a small percentage of people throughout the world are living the dream daily.

Get Free Stock Analysis By Email

Even if you aren't one of the lucky few, you can now cash in on their expensive tastes with a new exchange-traded fund (ETF). The Claymore Robb Report Global ETF (NYSE: ROB) will let you ride the wave of the ultra wealthy and profit from their big purchases.

Attack of the Millionaires
The ultra wealthy make up a very small portion of the worldwide demographic, however they have enormous spending power. This is the reason many high-end retailers have performed so well over the last few years. The price of gasoline is irrelevant when you're making six-figure purchases. Does a multi-millionaire decide not to buy a new Louis Vuitton bag because gas now costs $4 a gallon versus $3 a gallon last year? Not a chance.

The large developed countries such as the United States and the United Kingdom are where a large number of the money mavens reside; though they often have homes around the globe. The new phenomenon has to do with the large gains in the emerging markets. The stock prices in countries such as China and India have skyrocketed over the last decade and new millionaires are created every day. According to the World Wealth Report 2007, the number of millionaires in the world has doubled in the past 10 years.

Germany's BMW expects to sell 70 Rolls Royce Phantoms in China this year. This would make China the third best country for the company. Another car the ultra wealthy are lining up for is the Maybach, which is made by Mercedes Car Group (Not sure what the heck a Maybach is? Well you're probably not one of the ultra rich, but you can drool over them at the Maybach website). According to Mercedes China, sales in 2006 more than doubled from 2005 in China. The company is now offering a new toy for the wealthy, a $1 million special edition Maybach.

Riding the Wave of the Wealthy
If you are not yet ready to plunk down $1 million for an automobile you are not alone. That said, there are plenty of prospective buyers in the market. Which brings us back to the The Claymore Robb Report Global ETF.

Claymore has created an ETF that is based on the Robb Report Global Luxury Index. The index consists of between 20 and 100 stocks; the current number is 42. To gain entry into the index the stock must trade on one of the major global developed market exchanges and cater its business towards luxury goods or services. Sectors that fit the bill include high-end retailers, travel and leisure firms, investment companies, and other service providers. (To learn more on how the stocks in an ETF are chosen, see An Inside Look At ETF Construction.)

Ultra-Rich Stocks
The No.1 holding is Compagnie Financiere Richemont (CFR), a Swiss company that is the world's second largest luxury provider. The company markets brands such as Cartier, Alfred Dunhill and Montblanc. The No.2 holding is the largest luxury goods company in the world, LVMH Moet Hennessy Louis Vuitton. The company dabbles in alcohol (Dom Pérignon), perfumes (Christian Dior), leather goods (Louis Vuitton) and more. The ETF's third largest holding is DaimlerChrysler (NYSE:DCX).

Over the last year CFR has rallied from a low of 55 Swiss francs to a high of 80 Swiss francs in mid-July. Over the past 52 weeks the stock is up 38%. LVMH has not enjoyed as much success as CFR; however, it is higher than it was at this time last year.

The beauty of the ETF is the low exposure to the United States (only 25%). Even though the U.S. is the land of opportunity and there is a large number of ultra wealthy, the developed countries in Europe have their fair share. The majority of the remaining holdings are based in Western Europe and have solid name brands that have been around for years.

Outlook
A benefit of investing in luxury good and service providers is lack of volatility due to short-term market movers such as rising gasoline or higher mortgage rates. These may affect the ultra wealthy at some point,but they will often not alter a wealthy person's discretionary spending. The middle and lower class will cut out the once a year trip to New York for steak and a nice hotel stay, whereas the ultra wealthy won't think twice about the $800-per-night hotel in Manhattan.

As long as the global stock market continues in its current long-term uptrend, I see no reason for the ultra wealthy to stop spending and traveling. To back up my forecast is a number from Telsey Advisory Group that predicts the luxury goods market will grow 6% to 7% annually over the next five years. If you want to gain access to the stocks the millionaires support, ROB is your investment vehicle.

If you'd prefer to just buy that luxury vehicle yourself, you may need to read How To Become A Millionaire.

Looking to cook up a market-stomping stock portfolio? Check out our FREE report "7 Ingredients to Market Beating Stocks" and get started right now!

By Matthew McCall

Matthew McCall is the president of Penn Financial Group, LLC, a registered investment advisor. He also publishes two newsletters, The ETF Bulletin and The PFG Letter as well as other educational material. As a registered investment advisor, he manages clients' investments based on their specific goals and objectives.

Rate this Article: Your Rating: Overall Rating: Vote Now!

MORE STOCK ANALYSIS