Why ‘Big Short’ Michael Burry Has a Lululemon Bag Framed on His Wall

Michael Burry is not afraid to be controversial.

He was ridiculed by Wall Avenue and castigated by shoppers for betting in opposition to the mid-2000s housing increase, however his contrarian wager paid off when the bubble burst.

Since then, he is come out strongly in opposition to many speculative market traits, from meme shares and SPACs to crypto and NFTs. He is additionally shorted Tesla and Palantir, resulting in clashes with CEOs Elon Musk and Alex Karp, and has warned the AI increase will finish badly.

The investor of “The Large Quick” fame gave a contemporary instance of his love for controversy in a Substack post on Wednesday.

He recalled that in 2011, Lululemon founder Chip Wilson slapped “Who’s JOHN GALT” on the athleisure model’s reusable buying luggage.

Emblazoning Lululemon luggage with the opening line of Ayn Rand’s “Atlas Shrugged” was an alienating transfer, Burry mentioned. The e-book is beloved by many conservatives and libertarians, whereas Lululemon’s core demographic is younger, progressive, yoga-loving ladies.

Burry swiftly secured one of many questionable luggage. “As a result of my behavior is to poke bears, I framed it, and it hangs in my convention room to this present day,” he wrote.

“Yoga and Ayn Rand,” he continued. “They don’t belong collectively in the identical sentence not to mention a decent correct noun phrase.”

Burry listed the bag’s design as considered one of quite a few “own goals” by Lululemon which have turned off clients, squeezed margins, and pulled down its inventory value from over $400 to beneath $120 prior to now 18 months.

The investor turned author, who counts Lululemon amongst his private holdings, additionally blamed the company’s woes on new taxes and tariffs, product misfires, and a “administration vacuum.”

Burry made the case that Lululemon is out of trend within the AI period. However he drew a parallel to Ross Stores falling out of favor throughout the dot-com bubble, just for its inventory to compound at almost 21% a 12 months for greater than 25 years — double the S&P’s return excluding dividends.

Lululemon shares rose almost 4% on Wednesday to $113. Burry mentioned in his Substack submit that on the time of writing, they have been buying and selling at round $105 a share or 2.5 occasions tangible e-book worth, or the worth of Lululemon’s bodily and monetary property. That was the bottom a number of because the first quarter of 2009, he famous, describing that truth as “unimaginable.”

“I see a spring-loaded franchise, weighed down largely by short-term elements,” Burry wrote.

“I ought to count on a roughly 18% CAGR over a 15 12 months holding interval if all my assumptions are right,” he added.

Burry framed a Lululemon bag on his agency’s wall as a result of he loved how contentious its message was. Now he could also be courting controversy himself by championing an attire inventory that is confronted a raft of points and halved in worth over the previous 12 months.