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Burry's Tax Play: Lululemon Swap for Deckers
6 Oct
Summary
- Michael Burry sold Lululemon shares for tax loss harvesting.
- Deckers shares were temporarily purchased as a proxy.
- Burry plans to repurchase Lululemon after 30 days.
Michael Burry, the investor famed for 'The Big Short,' has undertaken a strategic tax-loss sale involving Lululemon Athletica Inc. (LULU). On Monday, Lululemon's stock price reached an 8.5-year low of $91.14. Burry sold his LULU holdings to capitalize on tax benefits, a move he plans to follow up by repurchasing the shares after the mandatory 30-day wash-sale period dictated by the IRS.
To maintain market exposure during this interim, Burry acquired shares in Deckers Outdoor Corporation (DECK). He views Deckers as both a temporary proxy and a worthwhile investment in its own right. Burry believes that the factors driving Lululemon's eventual recovery will also positively impact Deckers, highlighting similarities between the two companies, although he noted Lululemon is more heavily discounted.
This maneuver has drawn attention, as Burry had previously expressed bullish sentiments on Lululemon during its decline. He clarified that this sale is not a capitulation but a strategic financial decision. The IRS wash-sale rule prevents claiming a tax loss if an identical or substantially identical security is repurchased within 30 days before or after the sale. Burry's swap to Deckers is designed to comply with this regulation while preserving his potential upside from Lululemon.
