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TIP659: Hermès Stock Deep Dive w/ Shree Viswanathan

Sep 13, 2024

01:42:24

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Shree Viswanathan, founder and portfolio manager of SVN Capital, dives deep into Hermès, the luxury powerhouse known for its crafts like the Birkin bag. He discusses Hermès’ impressive 20.6% stock growth since its IPO, the brand's long-term thinking, and its strong market moat. The conversation delves into the attempted takeover by Bernard Arnault, strategic growth opportunities, and Hermès' unique approach to capital allocation. Listeners gain insights into the brand's resilience and the evolving risks in the luxury market.

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Quick takeaways

Hermès' exceptional long-term financial performance, with a 20.6% annual share growth since its IPO, outpaces the S&P 500 significantly.

The brand's unwavering commitment to craftsmanship and quality ensures its products stand out in the crowded luxury market.

Despite its successes, Hermès faces risks related to consumer preferences and economic fluctuations that require ongoing adaptation and management.

Deep dives

Hermes' Exceptional Growth and Performance

Hermes has demonstrated impressive financial performance since its IPO in 1993, with shares compounding at an annual rate of 20.6%, significantly outperforming the S&P 500's total return of 10.4%. Founded in 1837, the company has maintained its status as one of the most valuable luxury brands, famous for products like the Birkin and Kelly bags, as well as silk scarves and leather goods. The enduring quality and commitment to craftsmanship have contributed to its reputation, resulting in a market capitalization that reflects its legacy and brand value. This remarkable growth trajectory is a testament to Hermes' strategic focus on long-term value rather than short-term gains.

The Legacy of Family Control in Luxury Business

02:28

Understanding Needs: The Dream Equation

01:25

Luxury: The Harmony of Ordinary and Extraordinary

01:20

Luxury Brands Thrive on Certainty and Inflation Resilience

01:48

Intro

2min

Luxury Insights: The Hermès Model

8min

Balancing Short-Term Gains with Long-Term Brand Integrity

1min

Craftsmanship and Legacy at Hermès

14min

Exploring Leadership Qualities and Financial Tools

3min

The Hermès Acquisition Saga

30min

Luxury Pricing Strategy in 2024

4min

Capital Strategies and Bitcoin Mining Solutions

9min

Understanding Hermès: Luxury Resilience and Market Dynamics

25min

On today’s episode, Clay is joined by Shree Viswanathan for a stock deep dive on Hermès. Hermès is a luxury goods manufacturer renowned for its high-quality craftsmanship. The brand is known for its iconic products, such as the Birkin and Kelly bags, silk scarves, and equestrian-inspired items.

Since the IPO in 1993, shares of Hermès have compounded at 20.6% (excluding dividends), while the S&P 500 had a total return of just 10.4%.

Shree Viswanathan is the founder and portfolio manager of SVN Capital.

IN THIS EPISODE YOU’LL LEARN:

00:00 - Intro

02:38 - A business overview of Hermès.

10:28 - Examples of Hermès thinking exceptionally long-term in their business strategy.

30:16 - The attempted takeover of Bernard Arnault.

37:59 - The strength of Hermès’ moat.

56:01 - The growth opportunities ahead for Hermès and the luxury industry more broadly.

01:03:22 - How Hermès approaches capital allocation.

01:14:15 - Shree’s thoughts on Hermès’ valuation.

01:29:51 - Risks that investors should monitor for Hermès.

And so much more!

Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences.

BOOKS AND RESOURCES

Join the exclusive TIP Mastermind Community to engage in meaningful stock investing discussions with Stig, Clay, Kyle, and the other community members.
Shree’s fund: SVN Capital.
Follow Shree on Twitter.
Best Anchor Stocks write-ups on Hermès.
Books mentioned: 100 Baggers, The Founder’s Mentality, The Luxury Strategy.
Stewart Brand’s seminar on long-term thinking.
Howard Marks’ podcast with Morgan House.
Related Episode: WSB585: Concentrated Value Investing w/ Shree Viswanathan.
Mentioned Episode: WSB645: The King of Luxury w/ Christian Billinger.
Follow Clay on Twitter.
Check out all the books mentioned and discussed in our podcast episodes here.
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