The Hour Glass

[BlueKelah]

But to be honest, all these "analysis" is really just an academic exercise. Before I did my investment some time back, I re-read the last 100pages in VB on THG....there was just "so much noise" on hindsight. For THG, it is really about betting on the jockey, than the horse. While I don't have my own luxury watch but somehow I understand vanity I guess the amount of return on brain damage from THG, is much favorable in my situation.

THG has performed spectacularly over the past two years. And I will contend that it is actually the horse which contributed the majority of the performance; all luxury watch retailers enjoyed very good business. Those replies to SIAS only look good because the business currently looks very good.

This strong performance was induced by a perfect mix of pandemic, liquidity, and crazy returns from certain asset classes. THG rode the wave, and carried along its shareholders. There are many 'buy calls' on THG over the last 100 pages. But I don't see any of them arguing a boom in the resale value of watch prices leading to high demand at retailers leading to retailers gaining leverage over customers. 

Fundamentally, THG's business and financials are sound. But its outperformance was fueled by a confluence of unexpected events. So again, this demonstrates the role of (good or bad) luck, and the importance of diversification in investing.

Anyway, looking back is not worth as much compared to looking forward. So the more relevant exercise is to ask where the business will be heading in the next 10 years, and whether current prices are under or over valuing the business.

As I said before the secondary luxury watch market peaked in April this year and prices  correcting hard since then much like crypto. There will still be demand for new watches going forward so THG will still have business, but I would expect both top and bottomline to return to precovid levels, with revenue for coming year dropping back to 750m and earnings possibly around 75m. Could be worse if we have a global recession that results in a GLUT of luxury watches as all the speculators puke and finally capitulate. 

Just look at the moonswatches now, MOONSWATCH anyone interested?