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Hello, welcome back to the show "Two Fools Try Stocks." I'm Dylan. And I'm Vinny. Michael Bury is actually going all-in on Lululemon. This is really interesting because he made two posts on his Substack. One post before the report was released, and the other immediately after. I'll show both, because there's a big difference in what he thinks.
Um, he's determined on this issue. He admits that his position is too big, but he is ready to go down with the ship. He, well, I'll show you everything he writes. This is quite funny. Um, for full transparency, I did buy some. A very small amount. Not much. Exclusively because their CEO has changed .
I'll get to that now. This can usually help a little. Ahem. I do n't know. I am an amateur yoga pants enthusiast. Although I can't say I have a strong opinion on the finances of selling yoga pants. The P/E ratio is attractive, but I did some reading. They have probably one of the worst histories with executives in a long time.
They made some really stupid mistakes, I'll tell you at the end. But here, here's Lulu, here's the weekly schedule, okay? From peaks at 515 to drops all the way down to 100. Wow. Good. Minus 80%. This, this, this is really important. Yes. There have been a lot of misleading headlines recently that Michael Bury is down 60% on his position in Lulu.
This is not true. I know exactly when he bought it and what the average price was, so it's not even close . It's just for the sake of clicks. Um, here's the annual schedule. You see we were below the 200- day moving average, and honestly, it seemed like we had found a bottom with this very high trading volume, and then—the reporting wasn't great.
I'll clean my face. Wow, I meant to say, yeah, it looked like the price was starting to consolidate and form a base, but then it broke through, huh? Yes, minus 17%. It's September 3rd, but that was before the reporting. So, the report was released on September 3. He posted this this morning. Well, that is, before she appeared.
So, I'll read this quickly so as not to waste anyone's time, but I've been asked what it's like to lose money when stocks don't go my way, and many have asked for a review of Tailored Brands, which was a permanent loss of capital. This video is not about that. It was a terrible deal. Yes. Today, below, Lululemon—it's a tricky player in my portfolio.
This time, this cunning player is my biggest position. And he seems determined to take me where even mermaids are afraid to swim. Wow, he fit completely into his yoga pants. Dude, that's right. So, he now has a minimum of 17.4%, which I'll show you. So, an ode to bad management and the tight leggings policy.
He released an article that I didn't want to delve into because it would frankly take 30-40 minutes to discuss all the CEO's mistakes . The CFO aspect here is fantastic in terms of cost utilization. They only believe in share buybacks. They are trying to buy back shares in crazy quantities. Um, their gross margin and capital expenditures that he's looking at are frankly fantastic .
Their CEO's story is laughably awful. Starting with the CEO who, on a talk show, when accused of some pants being see-through, said, "Well, it's actually a matter of women's bodies ." "That was their problem." Terrible words. Then he insisted, saying that some women shouldn't wear them at all. Of course?
This is the CEO of the company trying to sell them. And then pull a big political stunt with yoga in China, not realizing that China and Japan are not thrilled with each other, and essentially playing the Japanese drum, which got them called culturally insensitive. So, it's not good. Ahem. Yes. Yes.
Evil. So, he said here, "Did each of my biggest positions cost me that much?" Let me think for a minute. Yes, of course, there is a housing crisis. This is practically my style of work. It all started with Avanti, a stock that I wrote off 50% and two months later saw it bought back at a price six times its market cap at the lows.
So, he's bragging a little. " Then there was the big short, of course." I haven't changed a bit. You've seen examples like this even in the 9 months since I started Cassandra Unchained. Adobe, Melina, Viva—they all fell sharply and recovered significantly. I don't know if I agree with that. Um, we...Okay.
The stock market can be crazy. I often talk about patience, but patience doesn't win the rodeo very often. It all depends on your grip and endurance. Ahem. This is a great analogy. Yes. Yes. 8 seconds. That's all. That's all. The last thing we need is to not be satisfied with 8 seconds. The pen turns green, and we're still holding on.
So, I expect a bad quarter. He says he's looking forward to it. Good. I'm continuing to hold Lululemon shares and will buy more if they trade below $100 tomorrow morning, as it's after-hours trading. Good. Again, he wasn't ready yet. Um, that's a lot cheaper, way below my IV 15. What it is— is its, uh, intrinsic value.
So, that's 15% of the profits over 15 years, that's his, um, my thesis still stands , and the new CEO is coming in this month. They actually arrived on the Tuesday after the holiday. I think so. I will be aggressively buying below $100, just waiting for a private equity firm to buy me out if nothing else happens.
And that's why we have carpet tiles in my home office. It was a long day. I didn't eat. I need Mexican food. Good. Then he moves on to profits. Are you ready for the first paragraph? Of course. I was reviewing the transcript of the Lululemon conference call. Obviously, the situation has changed for the worse.
Oh, okay. This, this, this, this is not very good when this is your biggest position. No. My IV 15 dropped quite sharply due to new assumptions and probabilities. Negative growth in China, although it previously showed that there was positive growth there of 20-30% quarter-on-quarter for some time. Negative growth in the US, despite the expansion of the store network.
This is not very good. Global benchmarks fell by 9%. Leggings sales were down 20% and operating margins were forecast to be in the mid- single digits, not good at all. God, this is garbage. I agree. That's why the stock fell 17%. I mean, it was crazy. This is a huge drop for a company that went from $515 to $120 in 18 months.
Mm. Devil. Evil. Even successful profit figures were a big mess when you factor in the one-, two-, or three-fold tariff bonus. Now he has gone into detail about how tariffs are destroying them. Um, despite everything, a new CEO is coming . I can smell the stench of a kitchen sink left without running water for too long.
Marketing expenses were incurred in advance. Er, the forecasts exclude repeat orders for products that are actually selling well. The new CEO , whom he is not thrilled with, although he is betting on him , comes with minimal expectations, as you would expect from Sherwin, fresh from the fight that silenced her chief critic and won the right to choose the CEO.
By the way, the main critic was the previous owner. Who couldn't start work for 6 months simply because she could. Now, he did something about the CEO. I believe she came from Nike, where she didn't really do anything special. And, it is believed, she was released. So it remains to be seen how this will work.
The company withdrew 7% of its shares at a price of 142, which is significantly below the cost of one share. I see $1.3 billion in cash, no financial debt, and $99 shares would be a little more than double the tangible book value of the brand. I think it still matters . So, he's still focused on the fundamental aspect of cash, ignoring the drop in growth rates or the lack of growth this quarter.
I've been looking at this all night, and in any of my scenarios where Lulu goes up again, the keyword is 99.50 below the intrinsic value (IV) of 15 and offers a potential annual return of 15-20% over 15-20 years . So if you look at the graph from 2017, it's the same. They went bankrupt, got a new CEO, and things went much better.
To put it bluntly, Lulu is a perfect opportunity below $100, assuming the company ever grows again. That's the bar I like— so low that you can barely trip over it. I was planning on buying more Lulu this morning after he said it was a nightmare under $100. He now explains that there are only a few times when he would risk that much .
Perhaps this also applies to Alibaba. I understand that. The profits were terrible. They were bad. That's why the stock fell 17%. They hope that, like with Intel, where there were three or four terrible CEOs every year, finally one, the current one, comes along and starts saying the right things, making deals with the president and all that .
So the expectation is that the price has fallen so absurdly that it should bounce back a little—that's what I understand from his words. Although, of course, he says that if they get growth, it's a 15-20 year investment, but I'm not sure I agree with that. I see this as a pretty good swing deal. That's why I'm doing this.
I took a very small amount . I was going to add more to see what happens next week, but I'm not going to allocate more than 1-2% of my portfolio to it. Um, I don't know about you. Have you studied this option at all? Oh, no, it will be necessary. It was a little in my field of vision, but I didn't delve too deeply into it.
I looked at their competitiveness , but this is a very complex issue. I think you need to have a good understanding of the consumer landscape, and to be honest, I don't wear Lululemon leggings. I am not their target consumer. So it's hard for me to gauge how popular they are and whether they're trendy enough to continue growing in the future.
But from a financial perspective, it looks like a great option for either resuming long-term growth or for a potential takeover. It's so cheap. Yes, it's, well, let's just say it's ridiculously cheap. So, on June 26th, he did his full review. He had already opened a position before that, but indicated his average price.
I have 124.65. On August 21, I added Lululemon at 115, which was 17.4% of its total portfolio. So, his average price is about 120. And then he plans to significantly increase the share. " Significantly" usually means 5% of the portfolio or more in all of his reviews I've read. That's a lot. That is, at this rate, it could amount to a quarter of his portfolio.
I don't know what he'll do, but "significantly" is really a lot. If you look at share buybacks, they take advantage of the low share price. They still have a billion left under the share buyback agreement. They spent more in the last two quarters, when stocks were falling, than they have spent since the first quarter of 2025 .
Yes. At least they have that, and since the stock price is , frankly, at a rock bottom, they are buying back significantly more shares because they are spending the same amount. So this is a nice moment. Yes. The current P/E ratio is 8.25, although again, you can't just rely on P/E for such companies.
The growth is scary, and the forward P/E is 10 to 11. They have 10% of the shares in a short position ( short float). The new CEO starts work. Yeah, I don't know what you think about that . I mean, the guy is brave. Dedicated, yes. He's completely on topic, and I think this is exactly the kind of thing where the stock could bounce back, because this is, well, a crazy drop for such a big company.
Yes. Sure, the reports were terrible, but that's too steep a plunge for such a company. I think if the price goes back to his purchase level, he might get a little relief, because frankly, he knows he's taking too much risk, but he plans to take even more risk. Yes, a full position for him—that's usually how much?
8-10% of his portfolio? 5-10%. Yes, he defines the full position as 5-10%, and then there's the situation with Lululemon. It turns out that a full position is one thing, and in Lululemon it is 17%. Yes, it's twice as much, and he also says he 'll buy more, so it's... Much more than just predictions.
Yes. Yes. Yes, that's interesting. I bought some. But I wo n't take much. Hmm, I don't know if I believe in Lululemon in the long run. I need to look at the new CEO, because if he's as bad as the previous ones, the stock could drop to 40. So, who knows? Yes, yes, that's true. Or Lululemon could be bought out by some private equity firm, you know, for $200 a share.
I...I have no idea. Perhaps. Okay, guys. Let me know what you think and whether you're going to join Berry in this deal. Yes, see you in the next video.
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