What Makes Lululemon (LULU) a Long-Term Compounder?

Tapasya Fund, an investment management company, released its fourth quarter 2025 investor letter. A copy of the letter can be downloaded here. The firm celebrated its third anniversary in August 2025 and is happy with the fund’s performance. In 2025, the fund performed well and achieved strong absolute returns, outpacing the S&P 500 and several other market indices. The year was marked by notable developments, especially related to tariffs, which led to substantial fluctuations in the market. There was a swift correction in April, followed by a robust rebound. The theme Artificial Intelligence (AI) has played a crucial role in supporting the market through times of volatility to reach new peaks, reaching over 38 new all-time highs this year. Against this backdrop, the fund returned 23.5% (net) in 2025 compared to a 17.9% return for the S&P 500 Index (with Dividends). The firm’s goal is to avoid any sector-specific bubble bursts, reducing the effect on the portfolio beyond general market downturns. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its fourth-quarter 2025 investor letter, Tapasya Fund highlighted stocks such as Lululemon Athletica Inc. (NASDAQ:LULU). Lululemon Athletica Inc. (NASDAQ:LULU) designs, distributes, and retails athletic apparel, footwear, and accessories. The one-month return of Lululemon Athletica Inc. (NASDAQ:LULU) was 3.51%, and its shares lost 46.35% of their value over the last 52 weeks. On January 08, 2026, Lululemon Athletica Inc. (NASDAQ:LULU) stock closed at $212.17 per share, with a market capitalization of $25.161 billion.

Tapasya Fund stated the following regarding Lululemon Athletica Inc. (NASDAQ:LULU) in its fourth quarter 2025 investor letter:

“Lululemon Athletica Inc. (NASDAQ:LULU): We view Lululemon as a long-term compounder and a relatively recent addition to our portfolio. We established our position during a market pullback stemming from issues with merchandise execution. While the company faces the headwind of tariffs and increased competition in the US from rivals like Vuori and Alo Yoga, our investment thesis is predicated on continued international expansion, particularly in China, which we expect to drive earnings growth. However, we would need to reassess our investment decision if Lululemon fails to achieve positive mid-single-digit comparable sales growth in the US.”

lululemon athletica inc. (LULU) Isn't Doing Great Right Now, Says Jim Cramer

Lululemon Athletica Inc. (NASDAQ:LULU) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 42 hedge fund portfolios held Lululemon Athletica Inc. (NASDAQ:LULU) at the end of the third quarter, which was 55 in the previous quarter. In Q3 2025, total net revenue of Lululemon Athletica Inc. (NASDAQ:LULU) rose 7% to $2.6 billion on both a reported and constant currency basis. While we acknowledge the risk and potential of Lululemon athletica inc. (NASDAQ:LULU) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than Lululemon athletica inc. (NASDAQ:LULU) and that has 10,000% upside potential, check out our report about this cheapest AI stock.

In another article, we covered Lululemon athletica inc. (NASDAQ:LULU) and shared the list of stocks Jim Cramer recently discussed. In addition, please check out our hedge fund investor letters Q4 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.