Most of the best performing stocks in any given period are part of a larger theme that is playing out in the markets. These themes/sectoral moves could be short term like what we saw in post covid rallies in Pharma & IT stocks or could be long term in nature like the commodity & infra trend of 2000-2010 or consumption & financialization theme of 2010-2020.
One of the key ingredients for such long-term trends to form and sustain is a large macro trend; like how in the case of 2000-2010 period, it was the rise of emerging markets like China & India that spurred infrastructure development & thus demand in commodities.
We believe that Luxury & Premium consumption could be a major theme for the coming decade; and we say so because of the following reasons-
Any macro report that you read about India talks about the non-linear rise in disposable income of Indian consumers as India’s per capita GDP breaks that mark of $2500 and moves higher.
All the basic non-discretionary consumption baskets are highly penetrated; even most of the discretionary baskets like eating out, owning a vehicle, entertainment etc are now relatively well penetrated and thus the next leg of consumption growth has to come from premium & luxury goods.
Lastly (this is more of a technical indicator), consumption is one of most preferred sectors for the market due to the longevity & resilience of growth it offers. And within the existing basket of consumption stocks, high growth has been hard to find. Now our market has luxury & premium consumption stocks to bet on. Earlier there were hardly any such opportunities, but recently we have seen multiple such stocks getting listed- Ethos Watches, Landmark Cars and Sula Wines.
These businesses operate in categories wherein consumption is driven by a cohort of consumers with high disposable income and wherein the consumption in absolute volume terms is quite low. So if the macro trend of higher disposable income does play out, it would create a lot of new customers for these businesses and could drive strong volume growth for them.
Further all these companies have significant leadership in their respective businesses, making them best placed to capitalize on the future demand creation.
All these stocks have done quite well since their listings (both as a business & stock) and we have been observing growing investor interest in these names.
In summary, Luxury & Premium consumption looks like a good theme to bet on; both from a macro point of view as well as from market’s point of view.
Previously as well, we had written about some emerging themes-
1. Newly Listed Tech-Start Ups- Move towards profitability was quite evident in Q4 results of these companies.
2. Areas of Neglect & Disruptions- Two opportunities highlighted in the post have done quite well as things have started to revert. And we continue to find more opportunities within this theme.
That’s it for this week, new insight coming up next week. So stayed tuned!
Surge Capital is a trade/brand name used by Ankush Agrawal (Individual SEBI Registered Research Analyst INH000008941) to provide equity research services in the Indian Equity Markets.
“Registration granted by SEBI, and certification from NISM in no way guarantee performance of the Research Analyst or provide any assurance of returns to investors”
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More details: https://www.surgecapital.in/disclosures
Stock specific investment disclosure:
Ethos- Invested. Not Traded in last 30 days. Active recommendation in Research Service
Sula Wines- Not Invested. Not Traded in last 30 days. Not an active recommendation in Research Service
Landmark Cars- Not Invested. Not Traded in last 30 days. Not an active recommendation in Research Service