Welcome to Money Morning - Only the News You Can Profit From.
Private Briefingwith WILLIAM PATALON III, Executive Editor
Not a member yet? Right now you can get immediate access to Money Morning’s Private Briefing for only $7.99. Click here to get started now.
Click here to get immediate access - for only $7.99.
Members log in:
Not a member yet? Sign up here or learn more.
Chief Investment Strategist
20-year seasoned market analyst and professional trader with highly accurate track record. Specialty in Asian markets.
Global Energy Strategist
35-year expert in oil and gas policy, risk assessment, and emerging market economic development.
Global Investing Specialist
30-year merchant banker, math- ematician, and author. Has a knack for being bearish at exactly the right time.
Capital Wave Strategist
30-year CBOE trader, market maker, and retired hedge fund honcho. Helped launch the Volatility Index in 1993.
20-year commodity guru and portfolio advisor. Top authority on metals + mining stocks. Head- quartered in Canada.
Defense + Tech Specialist
30-year veteran of tech markets with a Rolodex of Silicon Valley CEOs. Pulitzer nominee. Uncovered rare earths crisis.
30-year veteran analyst of business, economics, and financial markets. Award-winning author of "Contrarian Investing."
After being one of the hot stocks to buy a few years ago, Lululemon Athletica (Nasdaq: LULU) has hit a rough patch.
The company this week had to recall yoga pants made with fabric known as Luon because it was overly transparent - meaning Lululemon customers were walking around with see-through pants.
The products make up about 17% of all "bottoms' sold by the company. According to The New York Times, the recall is expected to account for about $60 million in lost sales.
Lululemon investors saw the stock take a 10% hit this week after the pants debacle.
And now, with some of its most popular products off shelves, the company has opened up the window for another "trendy" fitness chain to play to pantsless consumers.
That's one of the dangers of investing in a fad stock - it's not going to be popular forever.
And even though Lululemon's shares have soared more than 340% in five years - beating returns of both Apple and Google - its success isn't based on solid company fundamentals, but on trends and investor hype.
Here are a couple other "fad" stocks that might not be able to deliver for investors on consumer enthusiasm alone.
Perhaps you've heard that organic foods are big business these days. That is part of the reason Whole Foods (Nasdaq: WFM) is a momentum/growth stock.
Unfortunately, that does not mean all organic foods purveyors belong in investors' portfolios. A fine example of one that has the potential to give investors indigestion is Annie's Inc. (NYSE: BNNY).
One of Annie's biggest problems is that it's far from a wide-moat business.
Not only must Annie's contend for consumers' affections with Whole Foods, but other major, traditional food companies are getting into the organic craze.
For example, General Mills Inc. (NYSE: GIS) has been involved with organics for some time. Companies such as General Mills can be a real thorn in the side of Annie's because the bigger food producers can sacrifice margins in some market segments in favor of moving volume. A small company like Annie's cannot do that because as margins erode, so does the bottom line and there goes the growth story.
Annie's is arguably a mess right at this moment.
(After submitting your email address the page will refresh with the full article. You will receive a welcome email from Money Morning including the benefits of your free subscription.)