Lululemon Athletica inc. (LULU): This Clothier Takes a Bikram Pose

Hedge fund trade

Going into 2Q, there were a total of 21 hedge fund long Lululemon Athletica inc. (NASDAQ:LULU), this includes billionaire Stephen Mandel’s Lone Pine Capital, with a position close to $335 million (check out Mandel’s consumer picks).

Meanwhile, NIKE, Inc. (NYSE:NKE) had the most robust hedge fund interest of the three with 41 hedgies long the stock. Lansdowne Partners has the largest position in the apparel company among major hedge funds, with a $760 million position and comprising 10.4% of its 13F portfolio (see Lansdowne’s top picks).

Under Armour had only 20 hedge funds long the stock, which was a 43% increase from the previous quarter. Scopus Asset Management had the largest position in the stock, a $103 million position and making up 3% of its portfolio (check out Scopus’ portfolio).

Valuation

Despite Lululemon’s recent setbacks, the company is generating returns on equity that are head-and-shoulders above its major peers.

What’s more is that Lululemon Athletica inc. (NASDAQ:LULU) also has the lowest PEG ratio, around 1.0, making the company a solid growth at a reasonable price opportunity.

Bottom line

Although the recent departure of Lululemon’s CEO has led to a large sell-off of the stock, the long-term growth story is still intact. Now could be a great time to buy into the company. Meanwhile, Under Armour Inc (NYSE:UA) is another great story, but the valuation aspect makes Lululemon Athletica inc. (NASDAQ:LULU) more appealing. And with a diverse product base and broad geographical diversification, it appears Nike is less of a growth story, but more a stable income play.

The article This Clothier Takes a Bikram Pose originally appeared on Fool.com and is written by Marshall Hargrave.

Marshall Hargrave has no position in any stocks mentioned. The Motley Fool recommends Lululemon Athletica inc. (NASDAQ:LULU), NIKE, Inc. (NYSE:NKE), and Under Armour. The Motley Fool owns shares of Nike and Under Armour Inc (NYSE:UA). Marshall is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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