Tuesday, August 27, 2013

Nike (NKE) 2013 Review

Nike designs, develops and markets an extensive line of footwear, apparel, equipment and accessory products for athletic and leisure activities in over 190 countries.  Over the past ten years the company has generated an 18-20% return on equity, growing earnings and dividends 15-19% annually.  While the 2008/2009 economic downturn was not particularly positive for consumer spending, NKE performed well through the entire recession.  Longer term this premier company should continue to generate above average profit growth as a result of:

(1) its strong portfolio of globally recognized brands provides a competitive advantage,

(2) increased market share as a result of continued product line expansion in emerging markets and non Nike brands [Cole Haan, Converse, Chuck Taylor, Hurley and Umbro],

(3) expanding into emerging markets,

(4) stock buy back program.


(1) its customers are sensitive to economic conditions,

(2) intense competition,

(3) most of its manufacturing is overseas, thereby exposing it to local political/ economic/social as well as currency risks.

NKE is rated A++ by Value Line, has a 10% debt to equity ratio and its stock yields 1.3%.

Statistical Summary

                 Stock      Dividend         Payout      # Increases 
                Yield      Growth Rate     Ratio       Since 2003

NKE           1.3%           14%            30%             10
Ind Ave       1.0              14*             16                NA

              Debt/                       EPS Down        Net        Value Line
              Equity         ROE      Since 2003      Margin       Rating

NKE        10%          24%            0                 10%           A++
Ind Ave    16             16              NA                7              NA

*over one half of the companies in NKE’s industry don’t pay a dividend


            Note: NKE made great progress off its March 2009 low, quickly surpassing the downtrend off its June 2008 (straight red line) and the November 2008 trading high (green line).  Long term, the stock is in an uptrend (blue lines).  Intermediate term, it is in an uptrend (purple lines).  Short term it is in an uptrend (brown line).  The wiggly red line is the 50 day moving average.  The Dividend Growth Portfolio owns a 75% position.  The upper boundary of its Buy Value Range is $36; the lower boundary of its Sell Half Range is $66.



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