My third part of a company to invest in if you want to lose money. Before I start on my real stock, I was browsing stocks earlier and saw Sirius XM. If you buy Sirius XM stock unironically, I will give you $100 to explain why. Do not invest in Sirius XM unless you like seeing red in your portfolio. Now, here is my real stock to not invest in, Lululemon. Avert your eyes white women, this is your D-Day.

Investing in fashion is rarely a good strategy, especially if you are me. The industry changes quickly, and even if you are a staple like Adidas, you can find your world turned upside down fast. Fashion companies violate one of the core tenets of my investing strategy: predictability. Often, fashion companies cannot control their supply. If they can ride the wave of commercial love, they will make you money. Lululemon is a good example of this principle. If you invested in Lululemon in 2019, your money would have outpaced the S&P 500 by 3.5 times. However, like the auto industry, which I also hate, trends shift quickly, and disruption is the only constant.

Earlier this year, Lululemon tried to branch out of its singular market. They tried to invest in shoes, and revenue immediately depressed. The market did not appreciate this shift and sold off. Lululemon has since trashed most of its branching out and, in my opinion, is simply waiting for a disruption.

I believe disruption may be heading their way. Lululemon exists in a niche where it is an attainable status symbol. It is not a Bentley or a Rolex, and it is not Nike. This niche Lululemon has carved out is enviable, especially compared to other fast fashion companies. Over the past five years, it has been extremely profitable, but I could see a challenger approach. Both Nike and Adidas are having rough years. Nike stock is down 10% YTD, and Adidas has become 12% less profitable two years in a row. Both of these companies are going to be looking around and ruminating on places to throw their money. Both leadership teams are going to be worrying about their jobs, especially Adidas, as the former Adidas CEO was fired (mutually parted ways *eye roll*) in 2022, and this new leadership team has to prove itself. I could see both of these companies spinning off some brand and pumping money into it in a bid to crush Lululemon. That is just a prediction, but if it isn’t either of those companies, it will be someone. Someone will go after Lululemon, and I am not sure they can handle it.

Lululemon is not a screaming sell, but it is overvalued by 30% based on IV, exists in an industry where change is constant, and as the top dog its position is challenged, and they have not changed. That is the key: until Lululemon can show me that it can effectively adapt to changes in its industry, I will not invest. If you have been part of Lulu during the past five years, congrats. If you want to stay in, I would not blame you, but Lululemon violates too many rules.