TIP852: HERMÈS AND LVMH STOCK: TIME TO BUY LUXURY?

W/ DANIEL MAHNCKE & SHAWN O’MALLEY

TIP852: HERMÈS AND LVMH STOCK: TIME TO BUY LUXURY? W/ DANIEL MAHNCKE & SHAWN O’MALLEY

07 October 2026

Daniel Mahncke and Shawn O’Malley revisit the two luxury houses they passed on last time — Hermès (EPA: RMS), the 189-year-old maker of the Birkin bag, and LVMH (EPA: MC), the 75-brand conglomerate behind Louis Vuitton, Dior, Tiffany, and Hennessy. Both stocks now sit near their lows: Hermès is down more than 50% from its February 2025 peak and trades at 32 times earnings for the first time in a decade, while LVMH has fallen to a five-year low after two straight years of declining sales — something that didn’t even happen in 2009. The luxury industry has lost roughly 70 million customers since 2022, the Chinese market that tripled between 2017 and 2021 has been shrinking ever since, and a war in the Gulf emptied the stores on the Champs-Élysées of their best-spending tourists.

But some brands are growing. Daniel and Shawn work out why Richemont can grow 20% in the same quarter LVMH grows 3%, why Hermès still earns a 41% margin while LVMH’s fashion and leather division has given back seven points of margin in five years, and why the top 0.1% of luxury clients keep spending while the aspirational buyer walks away. They also cover the Chinese property bust and its five-to-six-year playbook, and how prior luxury downturns in 2009, 2016, and 2020 ended. In the end, Daniel updates both valuation models and decides whether either Hermès or LVMH finally earns a spot in The Intrinsic Value Portfolio.

SUBSCRIBE

IN THIS EPISODE, YOU’LL LEARN:

  • What makes LVMH and Hermès special
  • About the state of the luxury market
  • How Hermès’ business has done since our first pitch
  • How LVMH’s business has done since our first pitch
  • How China is impacting the luxury market
  • How long past luxury downturns were
  • Why Hermès has an even better chance of recovering quickly
  • Whether LVMH or RMS will be added to The Intrinsic Value Portfolio
  • And much, much more!

Disclosure: This episode and the resources on this page are for informational and educational purposes only and do not constitute financial, investment, tax, or legal advice. For full disclosures, see link.

TRANSCRIPT

Disclaimer: The transcript that follows has been generated using artificial intelligence. We strive to be as accurate as possible, but minor errors and slightly off timestamps may be present due to platform differences.

[00:00:00] Daniel Mahncke: Welcome back to The Investor’s Podcast. Today’s episode is 852, and Shawn and I actually had a one week break with no recordings of the two of us. And I can safely say that doesn’t happen too often. So you may have already forgotten, Shawn, but the last stock that I pitched to you was Meta.

[00:00:17] Shawn O’Malley: Oh, I remember it well. Don’t worry.

[00:00:20] Daniel Mahncke: Well, today I thought I would just pitch you one stock, but actually two. In fact, we looked at the two companies before you covered LVMH in July of last year, and I covered a Hermes in February of this year. But since then, both stocks have become arguably even more attractive as they have kept dropping and have now reached historical valuation lows, which for a company like Hermes still means 30 plus multiple, but still significantly cheaper than we can usually buy them. So while we decided not to buy either of them last time for our Intrinsic Value Portfolio, maybe this time it’s different.

[00:00:53] Shawn O’Malley: Well, we definitely like the businesses, but we were a bit concerned about the valuations. We would have had to pay for the shares in them. And then there are also some macro concerns that we’re already starting to show up. And anybody who knows us knows we’re not macro investors.

[00:01:07] Shawn O’Malley: But when the consequences of macroeconomic developments are already being felt at the company level, and then you’re still paying a premium, a hefty premium at that for shares on the stock, well, that’s just not the sort of margin of safety like investment setup that we look for.

[00:01:23] Daniel Mahncke: I got to say, though, I especially liked M&S, which now is 50 percent from its all-time highs and about 35 percent lower. So quite significantly lower than the last time we looked at the stock. But as you said, they definitely are concerning trends with these companies that cause us to not just look at the stock price, but actually figure out what’s going on.

[00:01:41] Shawn O’Malley: And that is why we’re here to record today’s episode. So let’s get into it.

[00:01:49] Intro: Since 2014, with more than 200 million downloads. We have interviewed the world’s best investors, studied deeply the principles of value investing, and uncovered many compelling investment opportunities. We focus on understanding businesses and intrinsic value, investing accordingly and sharing everything we learn with you. This show is not investment advice. It’s intended for informational and entertainment purposes only. All opinions expressed by hosts and guests are solely their own, and they may have investments in the securities discussed. Now for your host, Shawn O’Malley and Daniel Mahncke.

[00:02:35] Shawn O’Malley: All right, Daniel, where do you want to start today?

[00:02:38] Daniel Mahncke: So maybe a good place to start today is the state of the luxury market in general because it’s quite interesting. I feel like luxury has been seen as this stable non-cyclical industry, since its customers are supposed to be less concerned with how the general economy is doing. So when you have twenty million dollars in the bank account, you’re not really that fazed by how the economy is doing anymore. At least I assume.

[00:03:00] Daniel Mahncke: I unfortunately don’t have 20 million in my bank account. But as we worked out in our original episodes, luxury brands that get bigger and bigger also sell to people who you call aspirational buyers. And this is even more true for LVMH than Hermes. But as Hermes gets bigger, it definitely experiences similar things to you.

[00:03:19] Shawn O’Malley: And just to quickly mention the definition of aspirational buyers, these are consumers who have relatively high earning jobs, but they’re not wealthy or rich, or they don’t necessarily feel wealthy or rich, and they do very much need their monthly paycheck when they go out and shop at LVMH. So that’s sort of the difference. And on average, they’re spending about maybe 1,500 to 5,000 dollars per year on luxury products, which is still a lot of money by all means. And so what that also means is that they’re not buying these signature pieces like the Birkin bag, but they’re buying more entry level products.

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