RULERS weekly memo, 9 Oct 2026
Research, not investment advice. Prices are 8 Oct 2026 closes. Several facts come from news summaries and the earnings releases; 10-Ks were not re-read this week.
Verdicts
| Ticker | Verdict | Confidence | Price | Tranche 1 | Methods agree (screen → corrected) | One-line reason |
|---|---|---|---|---|---|---|
| ADBE | WATCH | 3/5 | $241.05 | $225 | 3 → 2 | ~10x non-GAAP earnings and ROIC ~40%, but AI disruption plus a CEO handover (1 Dec) and an interim CFO; corrected Sticker ~$230 |
| KNSL | WATCH | 4/5 | $339.65 | $280 | 3 → 0 | Excellent insurer (combined ratio 75.5%) but E&S property is softening; price is above all three corrected values |
| LULU | WATCH | 3/5 | $92.68 | $90 | 3 → 1–2 | Strong brand and net cash, but US comps −12%, guide cut twice, TTM EPS flattered by a tariff refund |
What changed since last week
- First RULERS run, replacing the scout memo. The 4 Oct scout had ADBE not listed, KNSL as WATCH (best quality, tranche ≤$270, buy ≤$200) and LULU at Sticker $46: this week's dossiers agree with the scout on KNSL and LULU.
- ADBE: Q3 (10 Sep) beat slightly and raised the FY guide; Q4 guide in line to slightly below consensus. CEO Narayen hands over on 1 Dec; CFO Durn left in June.
- KNSL: Q2 (23 Jul) combined ratio 75.5%, premiums −5% (commercial property −32.7%), new $250M buyback. Q3 due ~22 Oct.
- LULU: Q2 (3 Sep) guide cut again; new CEO O'Neill started 8 Sep and on 7 Oct reshaped the C-suite. Founder cooperation agreement added two directors in May.
Data issues found
- ADBE: the screen's Payback ($415) is the price that 8 years of FCF repays at 15% growth, not at current FCF (flat FCF gives ~$210). Sticker uses 15% growth against 9% EPS growth over 5 years. BVPS growth of −0.1% reflects buybacks. Stock compensation is inside owner earnings and was not quantified.
- KNSL: OCF-based Payback and Ten Cap include insurance float. TTM EPS of $24.64 includes investment gains; Q2 operating EPS was $5.54 against $7.72 reported. EPS and BVPS missing for 2015–16.
- LULU: TTM EPS $12.15 is stale versus the FY26 guide ($9.48–9.73, including a $0.86 tariff refund). Owner earnings ($2.03B) exceed FCF ($1.35B). History is missing two fiscal years and its labels look shifted against company years. The screen's Ten Cap implies ~122M shares versus ~114M in the market cap.
- Search summaries conflicted in places (for example the Adobe stock low and the lululemon Elliott stake); those items are marked unconfirmed in the dossiers.
Five lines for the owner
- All three names are on the screen's BUY list, but after correcting the growth rate and EPS none passes a margin-of-safety test today; all three are WATCH.
- KNSL is the best business and the furthest above its corrected values; the call changes with Q3 (~22 Oct) or a price near $280.
- ADBE is the cheapest on earnings (~10x non-GAAP); the question is AI, not the numbers. Watch the 1 Dec CEO start, a CFO appointment and the 22 Dec report.
- LULU needs proof that US comps stop falling; tranche 1 at $90 is only just below the price.
- No names are BUY, so no new deep-dive config was created this week.