Slowdowns in this sector tend to be short-lived (and a handful of stocks to catch the bounce)

Note: This interview was taped Tuesday 10 December 2024.

Consumer spending was remarkably resilient in 2024. In fact, US spending even hit a record $16.1 trillion in the third quarter.

Closer to home, spend was weaker – though it varied by age group – with essentials down and discretionary spend patterns changing. For example, there were indications that consumers were “trading down” with increased spend on streaming services or food delivery – suggesting these were value alternatives to eating out or other forms of entertainment.

In the wake of this, global luxury brands had a tough 2024 as consumers looked for value, but Platinum Asset Management’s Zoe Middleton argues this could be about to change.

“We know that slowdowns in luxury tend to be quite short-lived. And we also know that the leading brands have centuries of adapting to changes in consumer preferences,” Middleton says.

She notes that there is a market shift trending towards branded jewellery from unbranded and the long-term outlook for the overall sector is positive.

“We’ve also had valuations come back down to more realistic levels, and I think in 2025, we should see stabilisation of demand and increased innovation, which should help boost demand,” she says.

It’s an overlooked area of the market, a contrast to the general hype and speculation that Middleton is seeing in the market. She cautions investors to “focus on the fundamentals when you’re looking for investment ideas”.  In the following interview, as part of Livewire’s Outlook Series for 2025, Middleton discussed the following stocks. 

Please note that the commentary below is direct quotes from Middleton.

#1 growth stock set to explode - Trip.com (NASDAQ: TCOM)

"We've owned Trip.com for a number of years and we think that it's still got great growth potential in 2025 and probably further out as well.

It's the leading online travel agent in China and owns 50% of the leading online travel agent in India. So, the company is benefiting from growth in travel spend in those markets, and it's also taking market share so we think that sets it up well for 2020".

Sector set for a breakout and the stock to play it:
Sector: Health and wellbeing, stocks: Haleon (LON: HLN), Galderma (SW: GALD), Puma (ETR: PUM), Amer Sports (NYSE: AS)

"This is more of a theme that is a breakout theme. It's been going on for a while. I think it will continue in 2025. And it has implications for a number of industries within the consumer space and that's the growing consumer interest in health and wellbeing.

This is something I think that's been spun out of covid and stressed healthcare systems, that is making consumers want to take a more proactive approach with their health and also embrace a more active lifestyle". 

Contrarian call that may just surge in 2025 - Compagnie Financiere Richemont (SWX: CFR)

"Richemont is an interesting one. They own Cartier, the jewellery and watch brand, and they're benefitting from a market shift from unbranded to branded jewellery. 

They're also divesting their unprofitable e-commerce business, which should make them more profitable and focused going forward, and they're in a better place to manage their inventory during this downturn than they have been in previous ones". 

A sleep at night stock to weather any storm

"One stock that you could hold in almost any environment would be Haleon. 

It's a consumer healthcare company and I think we can all agree no matter what happens, happens in the world, people are still going to get coughs, colds, headaches, and things like that.

And in those situations people gravitate towards brands they trust and Haleon has a portfolio of those brands including Advil, Panadol, and Voltaren. And the company was spun out of GSK and it came to market with a lot of debt and it's rapidly paying that down. And as they pay down that debt, they should have capital available to invest in growth and return to shareholders".

Watch the interview

Make sure to watch the full interview for Middleton's review of 2024 and outlook for 2025, as well as more detailed insights about the stocks mentioned above.