Billionaires Are Selling Lululemon Stock and Picking Up This TSX Stock

Here’s why some are parting ways with their athleisure darlings and choosing this dividend darling instead.

| More on:
A close up color image of a small green plant sprouting out of a pile of Canadian dollar coins "loonies."

Source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Billionaires often have their reasons for buying and selling stocks. And when it comes to Lululemon (NASDAQ:LULU), the moves are as strategic as they are telling. Let’s explore why some are parting ways with their athleisure darlings and boarding another investment train.

Created with Highcharts 11.4.3Lululemon Athletica Inc. PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

Lululemon

Lululemon stock, the darling of the athleisure market, has long enjoyed a premium reputation, with its stock reflecting strong consumer demand. However, recent trends suggest that even a powerhouse like Lululemon isn’t immune to broader economic concerns. The company reported modest quarterly revenue growth of 7.3% year-over-year which, while decent, pales compared to its glory days of double-digit growth. For a company trading at a trailing price/earnings (P/E) of 26.5 and forward P/E of 22.6, some investors see these numbers as not just a plateau but a signal of tapering momentum.

Adding to this is Lululemon’s premium pricing strategy. This might not sit well with consumers during uncertain economic times. The brand’s reliance on affluent shoppers leaves it vulnerable to shifts in discretionary spending. Billionaires, always looking ahead, might see this as a risk worth shedding, especially when growth opportunities elsewhere appear more stable and diversified.

Created with Highcharts 11.4.3Canadian Pacific Kansas City PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

CP instead

Enter Canadian Pacific Kansas City (TSX:CP), which has become an increasingly attractive option. CP’s recent quarterly revenue growth of 6.3% year-over-year might not sound flashy. Yet it’s consistent, something investors love during turbulent times. The railway industry, though not glamorous, is a backbone of economic activity, and CP is perfectly positioned after its Kansas City Southern acquisition. This merger creates the first single-line railway connecting Canada, the U.S., and Mexico, unlocking growth potential in intercontinental trade.

CP also boasts a lean and efficient operation, with a profit margin of 24.5% and an operating margin of 37.4%. Unlike Lululemon stock, which has to continually innovate and market aggressively to maintain its edge, CP operates in a sector where stability and efficiency are king. Add to that its modest forward P/E of 21.3, and you start to see why billionaires might prefer the slow and steady ride of a railway stock.

Another key reason for this pivot is dividends. Lululemon stock doesn’t offer a dividend, focusing instead on growth reinvestment. Meanwhile, CP provides a modest but reliable dividend, currently yielding 0.71%. With a low payout ratio of 20.1%, this indicates room for growth. For wealth preservation, this is a win.

Looking ahead

Future prospects also paint an interesting picture. Lululemon stock has opportunities in international expansion and new product lines, but it faces fierce competition from other brands. On the other hand, CP’s growth is tied to structural trends in trade and logistics, areas less influenced by fleeting consumer tastes. Its integration with Kansas City Southern positions it to capitalize on cross-border trade in the North American market.

Past performance also plays a role. Lululemon stock once soared to breathtaking heights, making it a billionaire favourite for years. However, it’s down significantly from its 52-week high of $516, creating uncertainty about how much more it can climb. CP, while not as thrilling, has steadily grown and maintained investor trust – a stark contrast to the volatility of a high-growth consumer stock.

Bottom line

Ultimately, billionaires selling Lululemon stock and picking up CP signals a shift in focus. The flashy, fast-paced returns of Lululemon are giving way to the solid, steady profits of CP. It’s not about abandoning one market for another but about recalibrating portfolios to balance risk and reward. And for billionaires, that balance often leans toward the tried and true over the exciting yet unpredictable.

Should you invest $1,000 in Lululemon Athletica right now?

Before you buy stock in Lululemon Athletica, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Lululemon Athletica wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Canadian Pacific Kansas City and Lululemon Athletica. The Motley Fool has a disclosure policy.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

dividend growth for passive income
Dividend Stocks

Why I’d Invest in Canadian Value Stocks for Both Stability and Growth

Three Canadian value stocks are buying opportunities for investors looking for stability and growth.

Read more »

investment research
Dividend Stocks

Got $15,000? 3 Blue-Chip Stocks Every Canadian Should Consider

Here's why investing in blue-chip TSX stocks such as CNQ and CNR should derive outsized gains in 2025 and beyond.

Read more »

protect, safe, trust
Dividend Stocks

Where I’d Allocate $20,000 in 2 Safer High-Yield Dividend Stocks for Retirement Needs

Here are two safer, high-yield dividend stocks I'm looking at for my retirement needs.

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

3 Reasons I’m Considering Enbridge Stock for a $5,000 Investment This April

I'm considering Enbridge stock to provide some defensive appeal and a juicy dividend to my long-term portfolio.

Read more »

monthly desk calendar
Dividend Stocks

A 9.2% Dividend Stock Paying Cash Every Single Month

With one of the highest dividends out there, this dividend stock deserves attention in your portfolio.

Read more »

Happy golf player walks the course
Dividend Stocks

Build a Powerful Passive Income Portfolio With Just $20,000

If you are worried that the bear market could reduce your savings, these stocks can build a powerful passive income…

Read more »

Hand Protecting Senior Couple
Dividend Stocks

How I’d Use My $7,000 TFSA Contribution to Start Retirement Planning

These TSX stocks have solid fundamentals and are well-positioned to deliver significant tax-free total returns over time.

Read more »

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

How to Turn Your TFSA Into a Gold Mine Starting With Only $10,000

It doesn't have to be complicated or scary. You can turn any portfolio into a major gold mine.

Read more »