Is the Warren Buffett of Luxury a Better Investor Than the Legend Himself?

If you think there’s been a lot of talk lately about the richest person in the world, you aren’t alone. A few years ago, it was Jeff Bezos. Elon Musk recently reclaimed the title. But another man — Bernard Arnault of LVMH Moët Hennessy(OTC: LVMHF) — has been jockeying for the crown over the past year. And he made his fortune in much the same way Warren Buffett did with BerkshireHathaway(NYSE: BRK.A)(NYSE: BRK.B). In fact, you might argue he’s an even better investor. With the back story and the numbers, I’ll let you be the judge.

Similar but different

Many know the story of Warren Buffett and Berkshire Hathaway. As an investor looking for cheap stocks, he bought shares in a New England textile mill. The investment suffered for a few years until Buffett took a controlling stake and began using cash the company generated to make other investments — especially in the stock market. Although his strategy has morphed over time, he is a value investor through and through. He is always considering his investment options through the lens of a fair price.

Arnault’s path was very similar, although his style and strategy are quite different. Intrigued with luxury, he reportedly used money from his family business to buy the parent of Christian Dior out of bankruptcy. From there, he was invited to invest in the recently merged LVMH as the factions representing Louis Vuitton and Moët Hennessy struggled for power. In short order, Arnault had seized it for himself. He still controls about half of the company. The rest is history. Unlike the friendly grandfather-like persona Buffett has created, Arnault has earned nicknames through the years like “the terminator” and “the wolf in cashmere.” He is, in short, viewed as aggressive and ambitious.

There is certainly reason to be confident. He has systematically bought, cultivated, and reinvigorated luxury brands and created an incredibly formidable conglomerate. Some of the most widely recognized global brands decorate each segment. Brands include Dom Perignon (wine and spirits), namesake Louis Vuitton and Fendi (fashion and leather goods), Christian Dior (perfumes and cosmetics), Tiffany (watches and jewelry), and Starboard Cruises (other activities). It is a well-balanced portfolio of products that consumers around the world aspire to purchase.

Source: LVMH Moët Hennessy.

Two different ways to trounce the market

Over the past two decades, each man has been opportunistic in making acquisitions. Buffett, famous for timely bets when investors are nervous, has picked up several large industrial names, including railroad Burlington Northern Santa Fe, airplane parts supplier Precision Castparts, stable consumer-focused brands such as Duracell and Kraft Heinz, and chemical and energy companies.

Arnault’s strategy for LVMH is very different. As the head a house of brands, he is perpetually cultivating a relationship with the owners of other luxury brands in the hopes of one day tucking them under the LVMH umbrella. Often these are family-owned European brands, with status going back a century or longer. He has grabbed brands including Tiffany, Italian jeweler Bulgari, and leisure company Belmond (formerly Orient Express Hotels). It’s produced incredible returns. While Buffett is famous for handily beating the S&P 500 index over a long period, LVMH has crushed them both in the past two decades.

Data sources: YCharts; Yahoo Finance. *Twenty-year returns for LVMH used Euronext Paris Stock Exchange, where it trades as MC.PA.

Of course, Buffett started much earlier than Arnault. He gained control of Berkshire in 1965, when it was at only about $20 per share. The returns since are a mind-blowing 3,800,000% — or 19.8% compounded annually for about 58 years. It’s hard to piece together stock returns since Arnault became chairman and CEO of LVMH in early 1989. But his record, while not comparable to Buffett’s, is very impressive. The market capitalization of LVMH has grown from $7 billion to $445 billion today. That’s more than 6,250% overall and 13% compounded for 34 years. Because issuing and buying back shares will affect the stock price but not the company’s market capitalization, a better comparison is Berkshire’s market capitalization. It has grown 13,400% since 1989 — about twice that of LVMH.

One thing is certain: Both Buffett and Arnault are magnificent investors with strategies they have perfected over decades. In a 2017 interview with CNBC, Arnault called the Oracle of Omaha “the person I admire most in business,” citing his long-term approach, the quality of his ideas, and his conviction in them. While Buffett does appear to be the better investor, it’s hard to argue with Arnault’s results. Any comparison must also acknowledge that the two men had different aims. One was trying to grow his investments as much as possible, and the other was trying to establish the largest collection of luxury brands the world had ever known. One thing is undeniable: They both succeeded.

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Jason Hawthorne has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.