GreensKeeper Asset Management, an investment management company, released its fourth quarter investor letter. A copy of the letter can be downloaded here. The Value Fund finished 2024 +23.6% net of fees and expenses, which is slightly above the S&P/TSX +21.7% return, broadly in line with the DJIA +24.8% and trailing the S&P500 +35.7%. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2024.
In its fourth quarter 2024 investor letter, GreensKeeper Asset Management emphasized 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 5.35%, and its shares lost 14.84% of their value over the last 52 weeks. On February 13, 2025, Lululemon Athletica Inc. (NASDAQ:LULU) stock closed at $390.85 per share with a market capitalization of $49.6 billion.
GreensKeeper Asset Management stated the following regarding Lululemon Athletica Inc. (NASDAQ:LULU) in its Q4 2024 investor letter:
“Recent portfolio addition, Lululemon Athletica Inc. (NASDAQ:LULU) +45% was the second largest contributor to the Value Fund in Q4. As many fellow Canadians know, LULU has built an incredible brand by selling high-quality athleisure apparel. From its humble beginnings as a niche brand targeting Canadian yoga enthusiasts, LULU has expanded to selling a broad range of functional apparel across the United States, Europe, and Asia while adapting to fit local cultures.
LULU has consistently gained market share in North America, growing from less than a 3% share in 2017 to a 6.3% share in 2024 – second to only Nike (NKE). This growth has come remarkably efficiently, with returns on invested capital averaging 51% over the past 10 years. The company controls the customer experience by owning its retail stores (wholesale represents less than 10% of sales). At $1,608 in sales per square foot in 2023, LULU sits atop the rankings for real estate productivity across apparel retailers in the US. Owning distribution also allows the company to manage the brand and avoid discounting.
After a weak summer season driven by self-inflicted assortment missteps and a challenged US consumer, investors believed LULU’s best days were behind it as the stock declined 54% from its December 2023 peak. After a deep dive into the company, we came to a different view. With ample room to expand across Asia and Europe (markets that are as profitable as North America), the company should be able to increase its store count for years to come. Additionally, brand awareness remains low in the US at 31%. As LULU continues to improve its product breadth and menswear penetration (currently 23% of sales), we expect same-store sales to trend upwards. We thought the stock offered us many ways to win, and we initiated a position at the start of October at $264. Following a strong Q3 report, the stock quickly re-rated and now trades at $395.
While the quick +50% gain and adding another Canadian-domiciled company to the portfolio are great, what gets us really excited is our view that the intrinsic value of LULU’s business should continue to grow at an attractive rate for many years. Adding a quality compounder to the portfolio at an attractive entry price is difficult and something we consistently strive to achieve.”
A store employee in an athletic apparel store restocking merchandise.
Lululemon Athletica Inc. (NASDAQ:LULU) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 45 hedge fund portfolios held Lululemon Athletica Inc. (NASDAQ:LULU) at the end of the third quarter which was 45 in the previous quarter. Lululemon Athletica Inc.’s (NASDAQ:LULU) third-quarter net revenue reached $2.4 billion, up 9%, (or 8% in constant currency) and comparable sales in constant dollars increased by 3%. While we acknowledge the potential of Lululemon Athletica Inc. (NASDAQ:LULU) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
In another article we discussed Lululemon Athletica Inc. (NASDAQ:LULU) and shared the list of top luxury clothing stocks to buy according to hedge funds. In addition, please check out our hedge fund investor letters Q3 2024 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.