The market has had a great run so far this year, up over 16% since the end of 2012. Still, I think that you could buy these three stocks without overpaying for a good company.
NIKE, Inc. (NYSE:NKE)
NIKE, Inc. (NYSE:NKE) needs practically no introduction. If you’ve watched a basketball game, gone running, or simply walked down the street, you have seen the ubiquitous Nike “Swoosh.”
The company’s gross profit margin is 43.5%, which is in line with the industry average of 43%. Its profit margin is 9.22%, which is alsoin line with the industry average of 8.9%.
Nike has an excellent management team and the company’s shareholders have been treated well. Nike has a return on equity of over 21%, which far outpaces the industry average of just 1%. This means that Nike’s management team is very effective at deploying available capital.
The company has also done an excellent job of improving its inventory levels in China, as inventory was only up 3% year-over-year, while it was up 8% year-over-year globally. NIKE, Inc. (NYSE:NKE) has been working hard to reduce inventory through sales and taking back inventory to sell through its outlet stores. It has also been limiting the amount of new products it ships to China, which will likely dampen revenues in the short run but will ultimately be good for the company.
Nike is not just the footwear company that Phil Knight started out of the back of his car. It has now grown into a global sports and lifestyle brand. SportScanINFO data indicates that NIKE, Inc. (NYSE:NKE) basketball footwear momentum accelerated through holiday, increasing +40.3% at retail in the last four weeks with average selling prices up high-single digit percentages. In addition to the Nike basketball momentum, Nike golf has signed Rory Mcllroy to a long-term deal reportedly worth $20 million a year. I believe this is an excellent move for Nike, as the company now has both Tiger Woods and Rory under contract. The signing of Mcllroy gives them exposure to much of Europe, Mcllroy’s homeland and where he still plays often, and to a younger breed of golfers who idolize the current no. 1 golfer in the world. Nike also is now the apparel provider for the NFL, a move that could expose it to an older demographic that might not have been interested in its products beforehand.