Buy and Hold Forever? Here's How Nike and Lululemon Athletica Stack Up

You're in good company if you take a long-term approach to investing. After all, Warren Buffett, the famed Oracle of Omaha, stated that his favorite holding period is forever.

Investment success doesn't just depend on holding stocks for a very long time, of course. You have to choose companies that have the right characteristics for long-term success. This includes businesses that have competitive advantages.

Investors also need to understand the companies that they invest in. Nike (NYSE: NKE) and Lululemon Athletica (NASDAQ: LULU) have become well-known brands, which gives you a good starting place before conducting a deeper dive.

After learning more about each company, does one deserve that special place as a forever holding?

Image source: Getty Images.

Nike

Nike, which produced some memorable commercials over the years and teamed up with some high-profile athletes, has sold popular footwear and apparel for decades. In short, it became a powerhouse brand.

The company had a competitive advantage for a long time. These included a stream of innovative and new products that kept the revenue juggernaut going.

But Nike has hit a speed bump due to management missteps. This includes an over-reliance on its direct-to-consumer business that alienated wholesale partners, a lack of new products, and more intense competition from companies like On Holding (NYSE: ONON) and Deckers Outdoor's (NYSE: DECK) Hoka brand.

You can see the effects on Nike's revenue. The company's fiscal third-quarter top line dropped 3% after excluding foreign-currency translation effects. Revenue at its core Nike brand fell 2%. The most recent quarter ended on Feb. 28.

These issues have been ongoing and weighed on the stock price. Nike's shares have dropped 62.6% over the last three years through April 20. During this period, the S&P 500 index gained 71.7%.

Nonetheless, Nike's valuation doesn't seem particularly compelling, given the issues it faces in growing revenue meaningfully again. The shares have a price-to-earnings (P/E) ratio of 31, in line with the S&P 500's multiple.

Lululemon Athletica

Lululemon Athletica makes athletic apparel, including pants and shorts. Although high-priced, these have become very popular, particularly among younger women.

With the growing popularity of its products, Lululemon's revenue grew quickly. But it has slowed recently.

The company's fiscal fourth-quarter revenue grew 4% when using the comparable number of weeks in both periods and removing foreign-currency changes. The quarter ended on Feb. 1. Management expects a tepid 2% to 4% revenue increase this year. With increased competition from lower-priced alternatives and the inability to expand its brand's reach, Lululemon faces a tough task in revving up revenue growth.

Over three years, the share price has lost 55.7%.

It's no wonder that investors aren't happy. There have been rumblings, with the company's founder, Chip Wilson, waging a battle to make changes. This includes nominating three board members. Activist investor Elliot Management has also built a stake. But right now, these create questions rather than answers to boosting growth.

None of the above

I wouldn't make Nike or Lululemon part of my forever holdings. Both face challenges with revenue growth, and they don't have easy fixes. In fact, it's extraordinarily difficult to win customers back.

Given that, I'd keep looking for that forever stock to buy.

Lawrence Rothman, CFA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Deckers Outdoor, Lululemon Athletica Inc., Nike, and On Holding. The Motley Fool has a disclosure policy.