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Thursday June 25, 2009
Step up to Nike (NKE): A 'great company'
The editor of Investech Market Analyst is increasing his equity positions, such as a new buy rating on Nike (NYSE: NKE). He states, "With a portfolio of iconic brands, an identified growth strategy, recognized innovation, and sound financial footing, Nike fits the bill of being a great company." "Very rarely do we have all these conditions in place – that’s only occurred five times in the last 45 years. Historically, this means we should give the growing evidence of a new bull market every benefit of doubt. "While it’s true the market has moved quickly, we must remember that this would still be early in the cycle compared to historical bull markets. We are only three months past the March 9 low, and bull markets typically last 2-5 years, with an average length of 3.8 years. 
"Although this may not turn out to be a long bull market like the 1990s or 2002-07, given the massive stimulus and its potential aftereffects, it should be clear sailing through this year and into 2010. "Nike is the largest seller of athletic footwear and apparel in the world. Mark Parker, CEO of Nike, is not content with business as usual. Management is quick to reaffirm the principles that have won Nike an industry leading position – innovation, consistency, and competitive fire. "Nike is both an innovator and industry leader. In the roughly $20 billion market for athletic footwear, Nike dwarfs its nearest competitor with a nearly 50% market share. "Nike immerses itself into each product’s culture and maintains close connections with the athletes they seek to serve, both professionals and weekend warriors. An impressive fact… at the Beijing Olympics, Nike products served athletes in all 28 Olympic sports. "Innovation is leveraged into an offensive strategy. Over 60% of Nike sales are international, which is providing growth even as the domestic market for athletic wear becomes saturated. "Specifically, the Asia Pacific region is seeing tremendous gains as consumers trade-up in brand due to a burgeoning middle class and the relative affordability of Nike’s discretionary products. "This trend is evidenced by international sales growth of 13.5% per year for 2003-2008, more than double domestic sales growth of 6.5%. Nike is quickly becoming the brand of choice for international consumers – making foreign sales a key component of Nike’s revenue engine. "On a historic basis, all of the major valuation metrics (Price/Cash Flow, Price/Earnings, Price/Book Value, etc.) have Nike at a discount to median – even the dividend yield of 1.7% noted above is well above the historic median of 1.3%. "Bottom line, the current economic upheaval is providing the opportunity to own a premier growth company at a very attractive price." |
News Flash
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"The conditions are in place for a 'Best Buy' opportunity," says