LULU (lemon)

First of all, I'd like to apologize to those of you anxiously awaiting my promised piece on how to invest in these crazy times. I have failed you all and for that, I'm terribly sorry. I've just had other things going on. I will do it soon, I promise. How about that game last night? Well, for most of America, 'that' game was the LSU/ Alabama game, but for those of us in Los Angeles it was the UCLA/ASU game. It was thrilling all the way to the end when the ASU kicker missed 2 field goal attempts back to back which would have given them the win; a true nail biter. The refereeing was atrocious at times, in favor of ASU.

Getting to the heading, LULU. A friend of mine was visiting this weekend and we had a conversation about how he wanted to start investing in the market. He told me to send him a list of stocks that I would recommend. In researching this for him, I stumbled upon LULU (Lululemon Athletica). Here is a quick run down of the company:

EPS % Change (Last Qtr) : 73%
3 yr. EPS growth rate: 54%
Sales % Change (Last Qtr): 39%
3 yr. sales growth rate: 39%
Profit Margin: 25.8%
Debt: 0
P/E: 57
Price to Book: 12
PEG ratio: 1.5
(All data from Investors Business Daily except for P/B and PEG, which are from Morningstar.)
It hit its 52 wk high on approximately July 20th at 64.5 and it is now trading at 55.98. That is a discount of 15.2%.

I like the stock. It's growing rapidy, which explains how expensive it is. By most metrics LULU is expensive: P/Earnings, P/Sales, P/Book, P/Cash Flow are all well above industry averages and S&P averages. This, therefore, is no value investment by Ben Graham's standards. He didn't want to touch any stock with a P/E above 20 (even that was expensive) or a P/Book of greater than 1.3 (If I remember correctly). But I'm not Ben Graham and a lot of money can be made by investing in high growth companies like LULU, BIDU, ARMH, NFLX (?), AMZN, CMG, etc.

Besides the fact that it is expensive, its fundamentals are incredible. Investors Business Daily gives it a 99 composite rating, the highest possible. It is #2 on its top 50 stock list. The numbers I posted above speak for themselves. I especially enjoy seeing the 0 debt. It reminds me of a wonderful company I know of with stock ticker AAPL. If my memory serves me that stock has performed amazingly in the last few years.

The Holidays are upon us, and I think Lululemon will sell a lot of yoga pants, sweatshirts, and whatever else they sell. It's next earnings report is not scheduled until Dec. 8. The story here is pretty basic. I'm very seriously contemplating picking myself up some LULU tomorrow. If I do, I will be sure to let you all know.

I don't want to over think this one. Here is the daily chart for LULU. Do yourself a favor and have a look at the weekly one as well on stockcharts.com

To me the stock appears to be accumulating. It is still in a newly formed uptrend. As always, keep an eye on Europe because high growth/expensive stocks are the ones that can be absolutely pummeled if the market sentiment turns sour. That's it for today, happy investing!

Cheers,
EZ