One big investment dilemma has plagued me constantly this year. Should I ride the crypto wave or focus on what I think is the more stable and reliable stock market for my investments? My crypto journey has been as volatile and action-packed as a Marvel film. But I prefer DC comics’ more toned-down, extended-release vibe when it comes to my investment portfolio. Wouldn’t it be great if UK shares offered the returns of crypto while retaining their relative sense of calm?
Well, one UK share has managed to outperform Bitcoin this year. And the company has strong financials to back up its incredible 187% market returns in the last 12 months. Here are reasons why I’m watching this FTSE 250 share closely.
Time for luxury
A £1,000 investment in Watches of Switzerland Group (LSE: WOSG) shares in January 2021 would be worth £2,870 today. And although I regret missing out, I still think the business has growth potential heading into 2022. The luxury watch retailer’s great run in the market is backed up by a unique market condition and robust financials.
Over the last decade, I’ve noticed a switch in consumer mentality. Barring the extended Covid lockdown period, luxury goods have been in demand. The term ‘aspirational consumer’ encapsulates the way people look at luxury goods as status symbols. Research shows that this has been strengthened with the rise of social media, which has exposed a luxury lifestyle to more of us.
Luxury brands are now being marketed in emerging economies with a lot of success. The surge in popularity of premium goods in China and the Middle East has brought in a wider consumer base, which brands are capitalising on. This offers brands like Watches of Switzerland a new avenue for expansion. And some analysts expect the segment to double its market share by 2030. However, WOSG is currently focused on markets in the UK and the US, where it has been very successful recently. Sales in the UK grew 43% to £418.6m in the first-half of this year.
But is this enough to justify this UK share outstripping Bitcoin’s 147% growth in 2021?
The company recently released a half-yearly (H1) update for the 26 weeks to 31 October and it was a positive one for investors. Group revenue went up 44.6% to £586.2m compared to the same period last year. This resulted in statutory operating profit growth of 58.6% to £72.3m.
The luxury watches and jewellery retailer’s expansion plans in the US are gathering steam too. It recently purchased five stores in four states, which is expected to bring in around $100m in revenue. The company is focusing on luxury, monobrand boutiques in targeted shopping districts. The success in America has buoyed revenue targets this year to £1.15bn-£1.2bn (previous guidance was £1.05bn-£1.1bn).
But the stock does come with some concerns. According to a Bain luxury market report, watches were the worst hit luxury accessory category last year. That’s concerning to me as a potential investor in this UK share. And given growth this year, WOSG shares are currently trading at a forward profit-to-earnings ratio of 67 times, making it very overvalued at the moment.
But the sector looks healthy overall. This UK share is pricey at the moment. But I’m watching it closely to capitalise on any dips in price as I think it offers growth potential over the long term.
The post This UK share outperformed Bitcoin in 2021. Should I buy now? appeared first on The Motley Fool UK.
Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.