Grade
4 - 5 Winner
Student: Andrea L
Teacher: Kerry DiFusco
School: Spring Brook
Elementary School
Location: Naperville, IL
Question
Financial services professionals use key research that helps them
to be more successful in their jobs. When making decisions about investing
during The Stock Market Game, what are the three most important items you
should research before buying a stock, bond or mutual fund? Using your research
choose an investment and explain why you think it is a wise choice for you. In
your essay, also describe something you have learned in The Stock Market Game
that you think will help you have a more successful financial future.
Essay
An
Athletically Hip Investment
With free in shop yoga classes,
comfortable and fashionable clothes, and a goal for stress free healthy
lifestyles, nothing can set back Lululemon Athletica (LULU), the Apple of the
yoga world, from reaching its aspirations. This innovative sportswear company
has the potential for being the spark to a new way of life. This cool
investment pick relied on three things: the company strategy, the consumer
trends, and the value of the stock.
Getting to know the company and its
strategy is key to a great investment. It is vital to know how the company
operates, future plans and the possible success of it. Lululemon will certainly
be the trigger to a whole new decade of sportswear. The urge to innovate is
strongly ingrained in the roots of the company. Founder Chip Wilson was the
first to want to improve society when he attended his first yoga class and left
wanting to advance the cotton yoga wear sprouting into the Lulu facility. This
desire to innovate is what set Lululemon apart from other sportswear companies.
A wise man once said, “If you didn’t love it, you wouldn’t have run the extra
mile, took the extra weekend to complete it”. This is the case for Lulu and the
desire for modernization has paid off. The company is also expanding in many
ways. Aside from new stores, Lululemon has started designing sports apparel for
running and Ivivva, a dance, gymnastics, and ice skating clothes brand.
Lululemon’s strategic plan is to “elevate the world from mediocrity to
greatness”. Lulu is using partnerships to tactically feature their products for
Yoga, Pilates, and other athletics. They build relationships with athletes and
yogis in local classes they provide apparel to and the instructors in turn
serves as great ambassadors of the brand. With excellent in store staff they
help customers choose the right attire in a personable and enjoyable
environment. The company builds on this supportiveness to help their consumers
reach the life they love to live!
Being familiar with the current
trends and the consumers’ interest is another key. Lululemon’s new CEO
Christine Day, formerly a Starbucks executive, and another board member, Emily
White, formerly from both Facebook and Google, both bring experience from
innovative and successful companies. Researching companies is as simple as
newspapers, TV, or the internet. Despite the economy and the middle class
spending less, they still are likely to treat themselves with little rewards such
as Starbucks and Lulu. People also are more conscious about their health
especially with the growing obesity rates. Health and Fitness club sales are
expected to grow faster than the economy, good news for companies like Lulu.
Finally, knowing the value of the
stock is very important. Even if the company is well run and in a favorable
environment, if the price is too high, it may be a bad investment. Looking at
the P/E ratio of the company compared to its rivals can help determine the
stock value. Lululemon’s current P/E ratio is 44. Compared to Under Armour
(UA), another popular athletic wear company, whose P/E ratio is 45, Lulu
appears to be fairly valued. Checking what the 52 week high and low is also
important. Usually buying close to the high is a big mistake because stock
prices tend to drop close to its peak. Right now, Lululemon’s (LULU) stock
price is in the lower part of the range. This could indicate an opportunity for
investors to buy on the low and most likely sell it higher.
Playing the Stock Market Game taught
me that there is no short cut to making money. In order to make a good
investment, you really have to do your homework and not rely on what other
people are saying or buying. Although paying attention to market trends and
analysts is important, fully understanding what a company stands for is the
groundwork for a good profit. The Game has encouraged me to create a fantasy
portfolio using research based on these principles. I am hoping to be able to
invest real money in the future, and hopefully using these skills in order to
make a long term investment for college funds or other expenses later in life.