Trading the ‘Om’ Depot

Cramer on Monday acknowledged having misjudged Lululemon Athletica.

The Vancouver, Canada-based retailer sells yoga-inspired athletic clothing and is notorious for its "exorbitantly priced" yoga pants at more than $100 a pair, Cramer said. Its stock has been "absolutely smoking," though, having climbed 84 percent in the last 12 months and soaring 860 percent from $4.50 a share at the market's generational low on March 6, 2009.

"Lately I had been assuming that Lululemon's stock was like its yoga pants: too expensive, too expansive and definitely too hot to handle," Cramer said. "But ever since this company reported a fabulous, knock-out, thing-of-beauty quarter back on Sept. 10, I've been thinking that I got this one wrong."

Realizing he underestimated this stock, Cramer is now getting behind it. Lululemon, he said, is a "lifestyle brand." People don't just shop in its stores for athletic apparel. They go for the experience. The stores host free yoga classes, which creates a sense of community around the Lululemon brand.

Perhaps more importantly, Cramer said, Lululemon appears to have lots of growth ahead. The company currently has 130 stores in the US, Canada and Australia. They plan to add up to 12 stores this year and up to 25 new stores in 2011. With this kind of retailer, Cramer thinks the stock will continue to soar until it saturates is markets, which won't be for a long time.

While adding new stores, Lululemon has improved same-store sales. In its latest quarter, same-store sales were up by 31 percent. That's "staggering," Cramer said, because most fast-growing retailers only see increases in the low teens. Lululemon is taking share in the $15 billion women's active apparel market, and Cramer thinks they'll continue to outgrow the rest of the industry as more new customers become aware of the brand.

Cramer recommends buying LULU on a pullback.

Call Cramer: 1-800-743-CNBC

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