Hello, Reader.
Clothing firms are often millionaire-makers hiding in plain sight.
Consider Skechers USA Inc. (now owned by a private equity firm), a shoe brand that became wildly popular among middle-schoolers a decade ago. Anyone who got in early would have skipped away with a 10X return.
Skechers share price, 2012-2015
The same was true for Lululemon Athletica Inc. (LULU) during the late 2010s. The Vancouver-based company turned yoga pants into a wardrobe staple. Here’s what shares did starting in 2017…
Lululemon share price, 2017-2020
Even now, there are runaway successes happening under our noses. Here’s a look at the share-price action of Aritzia Inc. (ATZAF), another Vancouver company that has become a multibillion-dollar firm almost overnight. Its effortless-but-obviously-curated look has taken TikTok by storm… and turned many of Aritzia’s early investors into millionaires.
Aritzia share price, 2023 to present
The wonderful thing about these companies is that you don’t have to be a high-powered banker on Wall Street to pick out these winners. (In fact, most Wall Streeters I know have almost zero knowledge about these fashion trends.) Nor do you need fancy spreadsheets or a Bloomberg terminal.
Instead, you just need to have an eye for what people are wearing… or at least a family member who does. If your middle school kid is suddenly asking for a particular new brand with “drip,” you might have a future 10X stock.
In fact, there’s a famous story from legendary investor Peter Lynch, where he admits that one of his best-ever stock ideas came after seeing his wife buy L’Eggs pantyhose. These department store-quality hosieries were incredibly popular among his wife and her friends, and Lynch’s observation allowed him to get in before other investors.
After all, companies that don’t sell to middle-aged men working on Wall Street are often invisible to this cohort right until they aren’t.
That’s why I’m so excited about my latest pick – a centuries-old shoe company that has become cool again thanks to Gen Z icons like Kendall Jenner, Gigi Hadid, and Kaia Gerber. (If those names are unfamiliar to you, don’t worry; I had to ask my kids who these influencers are.)
Gen Z has an entirely different sense of what’s “cool” from previous generations. But being “in the know” could put some serious style, and gains, into your portfolio.
Allow me to explain…
A Recommendation With Style
Gone is the “extreme” look of Gen X – the spiked belts, wallet chains, and Doc Martens from the 1980s and 1990s. The same goes for the layered logo T-shirts that millennials once sported. Their Livestrong bracelets and varsity jackets now sit forgotten in attics and basements.
Instead, Gen Z are sporting an “ugly is the new cool” look. They grew up seeing the young Prince George wear yellow Crocs. (The same ones Gen X/Y icon Victoria Beckham allegedly said she’d “rather die” than wear.)
Members of Gen Z are turning Goodwill finds into TikTok treasures.
Even metal braces have made a comeback.
In other words, we’re seeing a widespread, once-in-a-generation shift that’s taking the world by storm. What was once counterculture is now “in.” This shift has turned my own kids’ wardrobes into a statement of “I didn’t try” (though effort was definitely involved)… and my latest footwear pick into a $2-billion-a-year company that still flies under the radar.
To top it off, Gen Alpha is now getting in on this trend. As an article in Parents magazine recently noted, teens and tweens are now trading in their Nike Slides for footwear made by my latest recommendation…
Teens and tweens are going wild for the classic sandals, often pairing them with crew socks…
The shoes are available in more than just the classic neutrals, now offering fun shades like faded purple and copper. These fun pops of color are perfect for summer days by the pool, or the complement Gen Alpha’s version of a preppy outfit…
“These are my daughter’s favorite sandals,” says one mom on Amazon.
That means my latest pick could see its recent 25% selloff turn into one of the best buying opportunities of the decade.
Young fashionistas (who obviously don’t try too hard) are pairing products from this company with everything from oversized blazers to crew socks… and all this demand is turning my latest Fry’s Investment Report pick into a multi-bagger hiding in your kids’ closet.
Make Your Move Before This Goes Out of Style
Now, I can’t tell you why these shoes are so popular. It’s like trying to explain why the “Dogtown” surf and skate culture was so prevalent in Southern California while I was growing up. Or why that look eventually morphed into the punk style that Gen X adopted.
It just happened.
But I can tell you that these big shifts can happen without Wall Street realizing it until after the fact. You see, analyst projections usually take past financial data and draw trendlines into the future. If a company grew 10% last year, then surely it must grow another 10% the next…
And we know clothing brands don’t do that.
Instead, these fashion-oriented companies can see their fortunes turn on a dime, or on a well-timed TikTok trend. Trends that were previously considered uncool suddenly become cool again. These types of turning points helped drive another one of my Fry’s Investment Report apparel picks, a global luxury and lifestyle brand, up 84% since I recommended it last April.
When a clothing trend gets popular, it tends to get very popular, very quickly.
What’s more, my latest recommendation just delivered the strongest year in its history as a publicly held company, and continues to invest in future capacity, distribution, and premium mix expansion.
Demand is booming, while disciplined production growth prevents product saturation and discounted pricing. The brand continues to extend into new, fast-growing geographies. The direct-to-consumer channel is robust and growing.
The result is a company whose annual revenues and net profit are now more than double what they were four years ago, and whose stock is still trading at a discounted value.
I just released my in-depth analysis on this company in my January issue of Fry’s Investment Report earlier this week.
You can learn how to access my full research here.
Regards,
Eric Fry
