Market Health

How to Profit From Fast Fashion

Editor’s Note: Our friend Bryan Bottarelli, Head Trade Tactician at Monument Traders Alliance, was recently blown away by something he experienced at his local mall.

And that’s why he’s here today. He’s detailing how you can profit off a certain trend by using a company that is nearly invisible to U.S. investors.

Check out the details below!

– Kaitlyn Hopkins, Assistant Managing Editor


Until recently, I’d never recommended a stock that traded on a foreign exchange.

But something happened last month that changed this trend.

In June, my family did something that we haven’t done in months… We went to the mall.

And I have to tell you, it was so jam-packed that it almost felt normal again.

Industria de Diseno Textil

Shoppers were out in full force – which led to one huge takeaway for me…

There’s a new trend called “fast fashion” that’ll be a major post-pandemic consumer behavior.

You see, people still want to be fashionable – but since trends change so quickly, gone are the days of shoppers spending money on expensive clothing and accessories. Instead, they’re now searching for low-cost fashion collections that are frequently updated.

The reason I know this is because one store in the mall blew me away. It had something that no other store had – a line outside of it that was a quarter-mile long.

No exaggeration, it probably took more than 30 minutes of waiting to just get in – and the line was in front of a store called Zara.

I admit, I had never been in a Zara store before – so while my wife and kids waited in line, I did some research.

Zara is owned by Industria de Diseño Textil SA (BME: ITX), known as Inditex. It’s currently the world’s largest fashion retailer – but it’s virtually unknown in America because it trades in Spain.

Spending on Clothing is Well Above 2019 Levels

It operates 7,469 stores in 96 markets and online stores in 202 markets – including under names such as Zara, Pull&Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home and Uterqüe.

Founded in 1963 and based in Coruña, Spain, Inditex saw its profits plunge 70% over the past year. But I think that’s about to change in a big way. The stock currently trades at 27 times this year’s expected earnings, which is in line with its peers. But now that the coronavirus has changed shopping habits – and consumers want fashionable clothes at Gap-like prices – I believe that Zara is about to become a leader in the new wave of shopping trends.

Anne Critchlow, an analyst at Société Générale, recently said that Inditex looks set to exit the pandemic with a “lower rent bill” after closing some stores. Going forward, she said, it’s positioned to benefit from rapid online sales – and I agree.

Anytime you’re at a packed mall and one store has a mile-long line, you have to take notice.

The same thing happened more than a decade ago when I saw Lululemon (Nasdaq: LULU) for the first time, and you probably know how well that stock has performed over the last 10 years.

Based on this, I think it’s wise to add some long exposure to Industria de Diseño Textil SA, the first Spanish stock I’ve ever tracked, to your portfolio.

Good investing,

Bryan

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