The LULU strategy
Well, they finally announced that the Q4 earnings will be reported on April2. They did not pre-announce any quidance up (or down). So that means they will likely make or beat their estimates. The key is the 2008 outlook; the US is in a recession, but Cdns are still feeling rich, especially in the west. So I suspect they are still buying $100 stretchy pants in Vancouver, Calgary, and Regina. But if mgmt uses the US recession as an excuse to guide lower, we should probably get out.
I expect a "buy-on-rumour, sell-on-news" movement on this upto April2. In fact, I see a short term recovery in the overall market, and Lulu as a high beta stock, may bounce back to about $33-34 next week. IF that happens, I suggest putting a stop-order at around $30-31, until the earnings come out. I still see great growth in Lulu, but we might be able to buy it lower ($10-15!) if there's some poor guidance.
Let me know if you agree and I'll take the action to put the stop-order next week.
Have a great long weekend!
posted by Junk Bonds @ 3/20/2008 07:40:00 PM
3 Comments:
Go ahead and give it a try. There is a risk that we get whipped sawed on this one by trading it! Alternatively we could buy more at a really low price to average down? if the beginning premises still hold.
Is LULU a high end or middle retailer/fashion store? I've read that the middle of the road retailers are being hardest hit with this credit contraction as the high end stores and the Walmarts stick it out.
I agree. If the price bounced back to mid 30 before the earning announcement, we can put a stop order.
Otherwise we can continue riding the roller coaster. I don't have problems with the volatility, as long as we still believe it is fundamentally a good investment in long term.
Well, LULU ran up 12% today so we may be at par by Wed :). I feel the original premise still holds true. The big question is how they will weather the US recession. I think they are trying to be a high-end retailer, but I'm just not sure that they've achieved that status. Hence my stop order strategy.
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