The head of LVMH is buying up shares in his company. Should investors follow his example?

French billionaire Bernard Arnault is once again betting on his own business. While LVMH shares are declining, he is actively buying them back, strengthening his control over the luxury goods empire he created. According to Bloomberg, Arnault has invested around €1.4 billion in the company in eight months, taking advantage of the downturn in the sector. Should ordinary investors buy shares following his example?

French billionaire Bernard Arnault has stepped up his purchase of LVMH shares this year in a bid to consolidate control of the luxury goods brand group he founded nearly 40 years ago, Bloomberg reported.

The 76-year-old businessman bought about €1.4 billion ($1.6 billion) worth of LVMH securities through his holding companies in the eight months starting in February, according to Paris Bourse data. In total, he bought about 2.5 million shares in the company, representing about 0.5% of the company's capital. The company declined to comment on the reasons for the purchase.

The deals took place against the background of LVMH quotations decrease caused by weakening of profit and recession in the luxury sector, the agency notes. Since the beginning of the year LVMH shares have lost about 4% of their value. On Monday at the auction in Paris they were cheaper by 0.8%.

According to Bloomberg calculations, Arnault bought shares at an average of €566 per unit, while in June he managed to buy securities at €448. By the end of last week, their price had risen to €612. Arnault's current purchases are reminiscent of his actions after the 2008 financial crisis. In 2016, speaking at the Oxford Union discussion club, he said that then he also bought LVMH shares, which later, according to him, more than tripled, writes Bloomberg.

A series of purchases brought Arnault and his family closer to owning half of LVMH. According to Bloomberg Billionaires Index, the businessman's fortune is estimated at $195 billion. The basis of his capital is a stake in LVMH, which at the end of last year reached 49% and almost 65% of voting rights. The conglomerate unites dozens of leading brands, including Louis Vuitton, Dior, Hennessy and Bulgari.

Founded by Arnault in 1987, the company is now the largest in France with a market capitalization of €302 billion ($352 billion). The billionaire's deal activity underscores his strategy of concentrating capital within the group, without diversifying into other areas, Bloomberg notes.

"It is remarkable that Bernard Arnault is showing such confidence in LVMH," said AlphaValue analyst Frederic Genevrier. He said the active purchases may reflect Arnault's desire to gain absolute control of the group, even though he already owns nearly two-thirds of the voting shares.

Last week, an analyst from DZ Bank reiterated a hold recommendation for LVMH shares (Neutral rating). The majority of analysts tracking the luxury group's securities recommend buying them - 14 out of 24. Nine advise to hold and only one advises to sell. The average target price (€594) indicates a possible 3% drop in the stock relative to the closing price on October 24.

This article was AI-translated and verified by a human editor