Put Your Money Where Your Mouth Is

Today, I was reminded by a friend that a stock that my fund owns, Lululemon Athletica, gained 13% today, and is up over 34% since I bought it. I’m glad to see the market confirm my selection of Lululemon as a firm poised for big growth.

I primarily invest in firms that show outstanding traction with consumers. I do all the necessary due diligence, research, and valuation on each investment candidate. The firms whose shares I ultimately buy all share one trait: consumers are fanatical about them.

I was tipped off about Lululemon months ago by some friends. They told me that Lululemon has built superstrong brand momentum and brand loyalty with its core market (adult women), that their yoga clothes fit better than anything else (and more importantly, make the wearers look sexier), and that Lululemon clothing demands premium prices that customers are more than willing to pay—$80 for a pair of stretch pants—that’s their core product.

Formation of my Philosophy

My investment in Lululemon is a reflection of how I’ve been brought up to recognize prudent investments. Early in life, I learned a powerful lesson from my wise grandmother. We were walking out of QFC (a Pacific Northwest-based grocer now owned by Kroger) when she told me that she owned stock in the grocery chain, and that she’d bought shares because she likes to shop there herself.

I was amazed. Right there in front of me stood a part-owner of the business! That made a strong impression on me, and from then on I would always remember her maxim: if you like spending your money somewhere, buy stock in the company. Building upon her teaching, I adapted a second rule that’s just as applicable: if people you know spend their money somewhere, buy stock in the company. It was this rule that was the basis of my decision to purchase shares of LULU last month.

I’m so confident in the business. It’s differentiated from its competition (does it even have competition?). It’s in a growing market. It’s got premium product and commands premium prices. People are really excited when a new Lululemon store opens up, and that buzz increases the visibility of the brand even more. The company hasn’t oversaturated the marketplace like McDonalds and Starbucks have in their respective markets, leaving plenty of room to grow. That’s what makes it such a desirable investment. The fact that it generates buzz and gets consumers talking (and gets them spending!) makes LULU worthy of an investment.

The moral of the story: listen to your grandmother.

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