A LULU to buy!

Lululemon athletica inc., an athletic apparel company, together with its subsidiaries, designs, distributes, and retails athletic apparel and accessories for women, men, and female youth. It operates through two segments, Company-Operated Stores and Direct To Consumer. 

As of January 31, 2016, it operated 363 company-operated stores under the lululemon athletica and ivivva athletica brand names in the United States, Canada, Australia, New Zealand, the United Kingdom, Singapore, Hong Kong, Germany, and Puerto Rico. lululemon athletica inc. was founded in 1998 and is based in Vancouver, Canada. (From Yahoo Finance)

www.lululemon.com


This company has an outstanding financial record and is a way to have some international exposure, since it is a Canadian company, in your portfolio. It is a consumer discretionary company and has cyclical ramifications.

Our investment club would buy this madcap company if we need one this size and in this sector. Diversification means that we are careful not to have too many stocks in any one sector, or any one size, or any one industry. We try to have 15 stocks with 25% small cap (under 1 billion in sales), 37% mid cap (between 1 and 10 billion in sales) and 37% large cap (over 10 billion in sales). The rest is cash.

Here are the numbers on this company.

1. It has grown over the last 10 years at a rate of 33.7%. Not bad. It had sales last year of 2 billion.
2. Pretax profit on sales was 24%. Excellent with the industry average of 10.30%. Some in the industry are Children's Place, Express, Under Armor.
3. Earned on shareholders equity was 27.57% over 5 years. That is just under Express with 30.82% but over the industry average of 24.88%. At this point in our study we would make a note of Express to do a future study.
4. Earnings per share is 43.4% moving at more than sales but not too much more in my opinion.
5. It pays no dividend and earnings are put back into opening more stores or enhancing products. That is good. WE are seeking growth not income.
6. It has a 4.7 to 1 potential to grow. That is what we call the upside downside ratio.
7. The stock went down today and is in the middle of the buy zone. I actually bought some earlier and it went down another $1. My track record at times. Sometimes that happens. It is not short term we seek. That zone we determine to be 41.6 to 81.7.

Any negatives?

1. They stay with current products alone and not develop new products.
2. It is a trend company and the trends could change in fashion.
3. Canadian companies have an international tax that creates filing headaches for your accountant or for you if you do your own taxes. This is an ADR so it trades on the New York Stock Exchange as an American Depository Receipt (ADR).
4. The UK exposure is subject to the downturn if it occurs with Brexit.

Well we are buying 100 shares today for our fantasy portfolio. So here is what we did and where we are:


100 shares of LULU cost basis $6,855.00 value is $6,848.00. (reflects the $7 commission)
GNTX cost $1,856.00 current $2,027.00 .... +171.00
BNS paid $5,408.00 value $5,870.00 = +$462.00
TSCO paid $6,667 value $7,672.00. = + $1,005.00
KMX paid $5,444 value $6,193.00 = + $749.00
LCI paid $3,238 value $2,495 = - $743.00
JLL paid $9,699 value $10,313.00 = + $614.00

Well LCI is doing much better. We were down over $1,200 at one point. Looks like our gain at this point is 5.75% or $2,251.00 growth since September. We are experiencing unprecedented growth in the markets in this political climate. Enjoy. It comes down also. Put on your seat belts.