Top Trading Ideas - luxury switch / listing arb
- SWITCH FROM TOD'S AND BURBERRY INTO PRADA LONG / VS. SHORT THE WHOLE LUXURY SECTOR
We strongly recommend to be long Prada (1913 HK) and short the luxury sector as a hedge - in particular Brunello Cucinelli, Ferragamo, and Kering. Prada is by far the cheapest and most profitable stock in the luxury space. The stock has been hit harder than the others in a very weak luxury sector. One of the reasons may be from the HK listing, where the shares may find it hard to be efficiently valued on the same basis as the companies listed in Italy and France. The significant price dislocation, along with a clear relative value advantage, and mean reversion justify a significant position in this long/short trade. We had been recommending long Prada, Tod's and Burberry vs. short Cucinelli, Ferragamo, and Boss. After the better performance of Tod's and Burberry, we now recommend concentrating on a long luxury allocation on Prada. FULL REPORT ATTACHED