Inditex: High-Quality Business with Long Runway of Growth

Max Hu of Tyee Capital Group presented his in-depth investment thesis on Inditex (Spain: ITX) at European Investing Summit 2017.

Inditex is the biggest fashion group in the world. It operates 7,200+ stores in 93 markets. The flagship brand is Zara. Max views Inditex as one of the highest-quality businesses in Europe, with a long growth runway ahead. Inditex has been a disruptor in the fashion industry for decades and appears likely to be the only long-term survivor with decent profitability in the fashion industry. The shares recently traded at a 30x P/E for the ongoing year and a forward P/E of 26x. The valuation is not cheap in absolute terms, but it compares favorably to the company’s historical range. The company is likely to keep growing in the double-digits for a long time to come. The consumer discretionary retail sector has been depressed due to the impact of Amazon.com. Max favors investing in long-term winners such as Inditex over single-digit P/E “value traps”. Despite the prominence of Inditex, many investors may still underappreciate the strength of the business model going forward. The recent share price pullback may provide a decent entry point.

About the instructor:

Max Hu serves as portfolio manager at Tyee Capital Group, a leading asset management platform with offices across Hong Kong, Beijing, Shanghai, and Shenzhen. Previously, Max was the founder and portfolio manager of Tempus Capital Limited, a Hong Kong based investment firm. Max’s investment approach is contrarian, value-driven and focused. His investments have been focused on easy to understand, wide-moat businesses with solid long-term growth prospects. He has worked at Deutsche Asset Management and is a CFA Charterholder. Max graduated from Tsinghua University in China, with a degree in physics and mathematics. He has done PhD research in Financial Economics at ETH Zurich and holds a Masters’ degree from University Heidelberg.

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