As much as I was disappointed that Prop 29 failed, it is nice that I still profited from Big Tobacco's win. For the uninformed, Prop 29 would have imposed a $1.00 tax on each pack of cigarettes sold in California. Supporters claim that the additional tax would have paid for cancer research, tobacco law enforcement and smoking reduction programs. As one might expect, Big Tobacco spent $46.8 Million (Altria/Philip Morris alone spent $27,531,416 - full disclosure). Far outspending Prop 29 supporters' $12.3 Million. The silver lining for anti-smoking supporters is that it was a tight race: 50.3% No vs. 49.7% Yes. The fact that the difference of 0.6% was all the extra $34.5 Million could buy, perhaps they'll be more successful next time.
Now I bet I'm confusing some people with my 2-sided position. How can I own tobacco stocks (MO) and yet support a ballot measure that would severely affect the Tobacco Industry? Simple, I want a cure for cancer. If the additional $1.00 tax would bring us closer, then so be it. I also believe that smokers would not stop smoking even if they have to pay an additional dollar per pack of smokes. They are too addicted to smoking and it would be a hard habit to break. Either way, I'll still profit for the habit of addiction.
In other news, I just posted a LIMIT order for 5 shares of Lululemon. Yes, I did a limit order instead of my usual Automatic Investment tactic. So what did I get for the extra $5.95 in fees? Well, I got 5 shares of LULU at $55.90 (currently LULU is at $55.85 - 8:36AM). I do not think waiting till next Tuesday for the order to post would have made the difference. I believe LULU will be higher than $55.90 by next Tuesday. I would rather pay a bit more in fees to catch the downward movement now than save the $5.95 only to ride the possible rally next week. I'd rather be wrong and next week and still end up with 5 shares of LULU than be right and end up with less than 5 shares of LULU.
So here is my Lululemon thesis:
LULU peaked at $80.30 on May 3, 2012 (52-week high of $81.09) and has been moving down since then. I believe LULU has been dragged down by the Euro crisis. I believe this decline would reach the bottom soon and LULU, along with it's athletic retail competitors would experience a boost during the summer months and of course, the Olympics. I am confident this would happen because of what I've been seeing on the streets and at the gym. People are out and about walking in the streets, working out and trying to get fit. I still see a huge number of LULU gear on women and some men. LULU's business model and their steady expansion in North America would be enough for them to keep growing and put money back in my pocket.
The summer Olympics would be another catalyst I'm looking at. Fans would be watching the world's best athletes and would be "inspired" to buy some athletic apparel. Sure, Nike, Reebok and Addidas would take the lion's share of the new active wear purchases but I believe the Lululemon brand would start capturing new customers. If LULU managed to sponsor at least 1 medal winner, this could be big boost for LULU. Even if the athlete wore Nike or Reebok during the events, if those athletes start wearing Lululemon for their other activities... like yoga sessions perhaps, LULU would be poised to benefit from this. Only time will tell.
One more thing about LULU. I have noticed that the women who wear Lululemon yoga pant also wear those pants as part of their daily apparel. It is almost like what happened to UGGs (Deckers - DECK). I would not discount the possibility that Lululemon apparel would become more than just yoga pants and workout gear. It may even become an UGGs-style phenomenon. However, unlike UGGs, LULU yoga pants look great and even if the yoga wear as daily wear trend dies down, people women would still need to buy yoga pants for their yoga sessions.
With these points in mind, I predict LULU would do the head and shoulders movement and would rise back up to it's $80-$90 mantle within the next 12-16 months. So yes, I am long term investor of LULU.
