LULU: Lululemon and why it is a buy

Lululemon (NASDAQ: LULU, TSX: LLL) is a rapidly growing retail outfit specializing in yoga apparel. If you haven't heard of them, you need to get out more.

Wednesday a report came out saying that a lab cannot confirm the company's claim that it's VitaSea line, which is supposed to be made of 24% seaweed, contains any seaweed at all. Take a look at the story.

The market didn't really like this news, as reflected by the drop when the markets opened. Take a look at the drop at the beginning of the one day graph. It traded all the way down to US$39.75, but recovered later in the day to close at US$44.29.

Why am I writing about this? Because I like the Lululemon growth story. I think the company has some serious long term growth potential that I want a piece of. It has recently traded as high as US$60.70. It is a relatively new issue as well, going public during our last summer. I would not buy it at $60 or $50, but it's current valuation is "oversold" in my opinion, and the news made the wimps run away from the stock.

I plan on publishing a more detailed analysis in the near future (when I have more time on my hands), but I thought this was the most interesting play for the day. Buy LULU now and hold it. Let the growth story pan out and I think you'll have a winner. If it goes down in the short term, buy more!

A bonus: our Canadian dollar is such that US equities are relatively cheaper than they would have been in history. In the longer term, the Canadian dollar will likely depreciate against the US, and so a speculation on a currency gain in the long run is also a reason to buy and hold LULU.

That is it for now, your comments are appreciated!