Quick update on Lululemon (LULU): the stock is up about 30% since my original write-up for paid subscribers.
I’m sharing this not to celebrate a short-term move, but because it’s a good example of one of the hardest parts of investing: buying when most people disagree with you.
I’ve followed Lululemon for years. The product is strong, the brand loyalty is real, and the balance sheet is clean, no debt.
But earlier this year, sentiment turned sharply negative. North America slowed, and the market quickly decided the brand was losing its edge. The stock fell nearly 60% from its highs.
The North America slowdown didn’t change how I saw the business, and international growth still looked like it was in the early stages, and the clearest way to see that was to put Lululemon next to Nike. Even in the most recent reports, the gap is still clear:
China growth: Nike -17% vs Lululemon +46%
Gross margin: Nike 40.6% vs Lululemon 55.6%
P/E: Nike 30x+ vs Lululemon ~15x
Lululemon was delivering stronger growth and better profitability, yet the valuation was still far lower.
And this is where Buffett’s reminder matters: “Be fearful when others are greedy, and be greedy when others are fearful.” It’s simple advice, but it’s difficult to act on when sentiment is ugly and the stock is falling.
That’s why I’m unlocking the original research note today.
I want you to see the work exactly as it was written at the time, the valuation model, the data, and the reasoning. I think it’s more useful to see the process than just the outcome.
If you enjoy this style of research and want access to new notes when they’re published (plus the full library), you’re welcome to join as a paid subscriber below:
Best,
Arda
Disclaimer: The content of this email and the associated research notes are for educational and informational purposes only and do not constitute financial advice. I am not a financial advisor, and the ideas presented here represent my personal opinions and analysis. All investments carry risk, including the potential loss of principal. Past performance is not indicative of future results. I currently hold a long position in Lululemon (LULU). Please perform your own due diligence or consult with a certified financial professional before making any investment decisions.
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