What is Motley Fool’s “One Luxury Stock for the Ages?”

Sniffing out the "stock for the 1%" pick teased by Dave and Tom Gardner

By Travis Johnson, Stock Gumshoe, March 5, 2012

The latest promotional campaign for the Motley Fool’s Stock Advisor newsletter is perhaps a bit more honest than most …

… they make it clear up front that they’re going to tell you about a few ideas for free, but that they’ll just tease you about their favorite pick and will only give it to you if you sign up for their paid newsletter.

Which is exactly what the other publishers do, of course, so no surprise there — but at least they were clear about it from the first paragraph of the email ad.

The pitch is that they’re recommending …

“The One Stock Millionaire Investors Want to Keep to Themselves”

And

“The Secret Stock of the ‘One Percent'”

So naturally, we want to know what it is. And we don’t want to sign up for a subscription to their newsletter to find out, no matter how friendly they are about refunds (that’s just now how we’re wired here at Stock Gumshoe — we see riddles, we want to solve ’em).

The idea is that the luxury market will see a tremendous boom as the global economy recovers — and indeed, that it’s already doing fine and will only get better (the 1%, after all, are not facing a foreclosure crisis). I don’t think I’m quite in that 1%, though perhaps I’ll be there shortly if I can just figure out what stock to buy next …

And as promised, they spit out a few “luxury” picks that are Stock Advisor recommendations, gratis — the freebies, to save you a few minutes reading the ad, are Boston Beer (SAM), Williams-Sonoma (WSM), and BMW (BAMXF on the pink sheets). So you can see the definition of luxury is a fairly broad one — retailers and brand names that appeal to the upper echelon of consumers.

They also make a point of saying that there are plenty of “pretenders” to the luxury throne — companies that dilute their brand with junk, or who try to become luxury by overzealous marketing or what, at heart, are shoddy fad products. So that’s the threat: without the Foolies, you might pick the wrong stock to profit from the boom in global luxury brands.

And the promise? Well, that’s their “stock for the 1%” that they tease thusly:

“BUILT TO LAST: ONE LUXURY STOCK FOR THE AGES

“This luxury consumer brand was founded during World War II by six artisans working in a tiny, family-run workshop in New York. Today, the company operates more than 700 stores throughout the world where its assortment of prestige goods attracts legions of logo-loyalists. Hobnobbing at the upper-end of the fashion accessory spectrum, the company has done a masterful job of retaining its luxury brand status while expanding its customer base. And it is really expanding. The recent roll-out of men’s products has been nothing short of dynamite, and has fortified the company’s fashionable standing on both sides of the gender line.

“Led by a long-view CEO and girded by an outstanding operational model — with multiple sales channels, offshore manufacturing, superior branded product lines, consistent innovation, and a passion for customer service — the firm delivers an extremely profitable financial model. Over the past 10 years, it has improved its business in essentially every important financial category: revenue, revenue growth, operating margin, net margin, and return on assets. Add to these industry-leading numbers the fact that the company has a hoard of cash and very little debt, and you’ve got an investor’s luxury dream stock.

“But all these strengths aside, the consideration that has David and Tom Gardner so excited about this company right now is its global promise. After all, if there’s one factor that turns a great luxury brand into a great luxury growth brand, it’s international positioning.

“Over the past few decades, the global market for luxury goods has absolutely exploded. This is not just in Japan, where brand-conscious upper-class consumers have long embraced name fashions from the west. China and India, too, are becoming promising markets for luxury goods, and the oil-rich Middle East is right there with them. Discretionary incomes are on the rise in many parts of the world, and as the wealthy get wealthier, it’s a boon for luxury goods companies with an international foothold.

“‘The luxury goods sector in the emerging markets is a robust place to invest,’ says Matthew Deeprose of the international-focused Dominion Funds group, ‘because, while the demand for aspirational goods and lifestyle products is healthy in the west, the demand from the developing countries is off the scale.’

“Already well-established in Japan, and now making serious in-roads in China and the Middle East, the company we’re talking about here is perfectly positioned to take advantage of the suddenly ravenous global hunger for luxury brands. This is the catalyst tha