I don’t know if you’ve noticed lately, but the worlds wealthiest are getting richer every day, while the rest of us are left to pick up their scraps. Luxury goods continue to fly off the shelves at an astonishing rate as the affluent enjoy the fruits of their labor, or shall I say good fortune. Either way, luxury brands don’t seem to have a shortage of countries to pedal their wares. Russia, China, Mexico, and other emerging markets are ripe for the picking as the number of millionaires grows daily. Slow down in Japan, no worries; there are plenty of regions to pick up the slack and Richemont’s(CFR) latest earnings is evidence of that.

Richemont is a conglomeration of fashion businesses including jewelry brands Van Cleef & Arpels and Cartier, watchmakers Baume & Mercier and Piaget, snazzy pen maker Montblanc, leather bag maker Alfred Dunhill, and women’s clothier Chloe. All very well respected in the fashion industry and all independently run by their managers. The interesting piece to this mix is their ownership stake in British American Tobacco (BTI), one of the holdings in our Bastard Fund. I can hear the socially responsible investors running for the hills. Long story short, in Richemont’s early days, 1988, the company had a large position in Rothmans International. In 1999, British American merged with Rothmans, and Richemont ended up with a 23 percent share in the larger company. Since then, it’s lowered to 19 percent where it currently stands today. It’s not a politically correct investment, but the equity stake produces a boatload of cash, useful for growing the main operating parts of the business.

The equity investment aside, here are five reasons Richemont is the real deal:

• In 2007, operating sales increased 16 percent with double-digit increases in every segment of their consumer goods portfolio including a 50 percent gain in their Chloe unit, thanks to an expanded retail network.

• In March the company entered into a 50/50 partnership with Ralph Lauren(RL) to create the Ralph Lauren Watch Company. This can’t miss.

• For the first time in five years, in 2006, the company produced more profits from their operating businesses then from their equity investment in British American Tobacco. In 2007, once audited numbers are available, they’ll make it two years in a row.

• The stock currently trades at 34 times earnings. Given they own some of the finest brands in the world; it’s not unreasonable.

• Sales in Europe and Asia account for 65 percent of total revenue. I wrote an article last week about Valentino Fashion Group stressing this is where the action is in luxury fashion.

Ever since I can remember, I’ve had friends who salivated over the Montblanc pen. I personally don’t get it but do understand there are plenty of people around the world who consider this and other Richemont brands, symbols of success. Rather than decry their ostentatious ways, buy the stock instead, making and saving yourself a bundle of money. You can always buy a BIC or two with the difference.

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