Over the last week or so I have begun to build a new position in Lululemon. This company has been on my watchlist for a long time, I actually owned it previously for about a month or two (in 2018 I think) but didn't feel completely comfortable with the business so got out. In hindsight that wasn't the best move as the stock has gone up about 500-600% since then!
I got introduced to the brand during my time living in Vancouver in the 2010s and could see clearly the cult following the company had generated. My wife was a big fan and has purchased many of their items over the years. I have also started building up a small collection of items (a few pairs of pants and shorts) and the quality is quite good.
As a business the company is in line with what I usually look for. Strong margins, little to no debt, good growth potential, great returns on equity and invested capital. The price over the last 5 years has always been very high, often in the high 30s, even 40s on a P/E multiple. It's only recently where things have begun to change. So far this year the stock is down from over $500 per share to $250 as of yesterday.
Stock Purchase Strategy
I started buying just under $300 and have built a 5% position at an average price of $285 (about 21 times trailing earnings). Should things keep dropping I would be interested in buy again at a price of $215, and would probably buy a final chunk if it ever got to $140 per share.
It's always hard to time the buying perfectly and you can never expect to get the bottom but historically these things tend to drop more than you expect so always good to have a multi step buy process so you are able to add more stock as the drawdown intensifies.
Will keep monitoring the situation and see if any of my future buy points get hit, and then have the courage to buy when this happens.
I got introduced to the brand during my time living in Vancouver in the 2010s and could see clearly the cult following the company had generated. My wife was a big fan and has purchased many of their items over the years. I have also started building up a small collection of items (a few pairs of pants and shorts) and the quality is quite good.
As a business the company is in line with what I usually look for. Strong margins, little to no debt, good growth potential, great returns on equity and invested capital. The price over the last 5 years has always been very high, often in the high 30s, even 40s on a P/E multiple. It's only recently where things have begun to change. So far this year the stock is down from over $500 per share to $250 as of yesterday.
Stock Purchase Strategy
I started buying just under $300 and have built a 5% position at an average price of $285 (about 21 times trailing earnings). Should things keep dropping I would be interested in buy again at a price of $215, and would probably buy a final chunk if it ever got to $140 per share.
It's always hard to time the buying perfectly and you can never expect to get the bottom but historically these things tend to drop more than you expect so always good to have a multi step buy process so you are able to add more stock as the drawdown intensifies.
Will keep monitoring the situation and see if any of my future buy points get hit, and then have the courage to buy when this happens.