When the markets tank and the economy looks grim, smart investors go looking for bargains. And, according to some observers, few industries have more potential upside at the moment than fashion.

“If you’re a strategic investor, it’s a terrific time,” said Haresh Tharani, chairman of the privately held conglomerate Tharanco Group. In February, the company, already the majority owner of the five-year-old brand doo.Ri, purchased Joseph A., a New York-based knitwearmaker.

Since early last fall, with fuel prices high and markets shaky, interest in acquiring smaller fashion brands—as well as larger ones that haven’t yet expanded internationally—has been on the rise. Smaller private equity outfits that had been priced out in recent years are looking for toeholds in the industry for $1 million to $10 million; larger companies outside of the apparel business are seeking to diversify; and foreign investors are trying to capitalize on the weak dollar.  

Tharani, for one, is hot on the prowl. “We’re looking at a dress company, which makes sense because we have two other dress companies,” he said. “It will make us more important with sourcing and with retailers. We’re looking at a high-end shoe-and-accessory company and at a men’s designer brand. There are many different opportunities, but most people are gun-shy.”

Calvin Klein owner Phillips-Van Heusen said last month that acquisitions in line with its current brands (read: luxury brands) are its first priority. The company, which said it has both cash and access to credit, is strategically looking to the future, taking advantage of bargains that may be out there in a precarious economy.

“This is the time to make acquisitions that in the future pay significant dividends,” chairman and C.E.O. Emanuel Chirico said on a conference call with financial analysts on March 25. “Chaotic times are the times when good companies do acquisitions that can really fuel growth going forward.”

Deals in the past six months have ranged from tiny to large. A consortium of private equity groups bought Ellen Tracy from Liz Claiborne in February for $42.3 million, a deep discount from the $180 million Claiborne paid for the company five years earlier. The buyers benefited from the economy and from Claiborne’s fire sale of noncore brands.