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.

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.

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.