Money Talks: 80-20 Investments’ Angie Ellis shares her hot retail stock tips
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Money Talks is Stockhead’s regular drill down into what stocks investors are looking at right now. We’ll tap our extensive list of experts to see what’s hot, their top picks and what they’re looking out for.
Today, we hear from Angie Ellis, investment manager at 80-20 Investments.
Ellis is currently keeping an eye on the consumer discretionary sector.
“Consumer discretionary has only had a one year return of 8.3 per cent, but the companies I follow have a global focus and have had great one year returns,” she told Stockhead.
Ellis sees a growing trend for responsible consumerism with demand for eco-friendly products.
She added that social media platforms like Facebook and Instagram are increasing the demand for fast fashion — something special and interesting to be seen in, travel and quality clothing for outdoor activity.
Ellis’ clear favourite and top pick is Lovisa Holdings (ASX:LOV), which is up 50 per cent in the year and has a market cap of $1.45 billion.
“I like Lovisa as they have no debt and they don’t advertise. They have great locations too. I am looking forward to attending the AGM next week in Melbourne to hear about the international store rollout,” she noted.
The fast fashion company plans to open the first of six New York-based stores by year’s end, with one opening on Long Island on December 19.
“They have an online store in Australia/NZ and now Europe/UK. The ROE [return on engagement] is 75 per cent,” she added.
Ellis also ticked off the excellent customer service, quick sell-out of products, strong logistics and high quality despite affordable prices as other reasons for why Lovisa is her top pick.
“They can quickly test new ideas in one or two stores to see if they will work before rolling it out to all the stores,” she added.
Next on Ellis’s list is City Chic Collective (ASX:CCX), which has risen 120 per cent in the past year and currently has a market cap of $532.5m at a share price of $2.79.
“I bought into City Chic over a year ago after they divested Millers, Crossroads, Katies, Autograph and Rivers to Noni B and put all their focus on its flagship plus-size brand, City Chic. I met the management too at that point and was very impressed with the team,” Eliis told Stockhead.
“I have bought more shares recently as they are buying the e-commerce assets of American clothing chain Avenue Stores for US$16.5m after that company filed for bankruptcy in early August.
“Avenue Stores has revenue of US$75m from Jan-May this year and US$27m were online sales.”
She said the acquisition provides the company with access to a well-established customer database for a low price, which would enhance the company’s powerful online presence and increasing online sales.
Ellis added that while City Chic’s range appeals to a younger age group and is mainly focused on dresses, Avenue has lower prices and stocks a more conservative range that appeals to an older demographic.
Rounding up her trio of picks is Kathmandu (ASX:KMD), which rose 31 per cent in the past year. Recent gains have increased the company’s share price up to $3 and its market cap to $807.9m.
Ellis said that Kathmandu staff have told her that the company’s products are selling well to overseas tourists from China and the Middle East as well as people going on cruises.
“Shareholders just approved its $350m takeover of Rip Curl. This deal will almost double Kathmandu’s revenues and now they will have operations in Australia, New Zealand, North America, Europe, south-east Asia and South America.
“Surfing is growing in popularity and surfing is poised to become an Olympic sport for the first time in 2020. I think this is exciting times ahead for Kathmandu.”
Touching on her earlier points about the increasing trend towards responsible consumerism, Ellis added that Kathmandu has products with the “PETA-Approved Vegan” logo.
“They have also appointed Vizeum which is part of the Dentsu Aegis Network to work with their other agencies, so I’m expecting to see a powerful lift in integrated digital communications,” she added.
Angie Ellis has been investing full-time for five years and is featured regularly in The Age/SMH shares race. She speaks on investing through the Australian Investors Association. In the last shares race Ellis came first with a 71 per cent return at the end of the six weeks.