John Hussman (Trades, Portfolio) purchased a 100,000-share stake in Nike Inc. (NKE, Financial) during the first quarter.
Nike designs, develops and markets footwear, apparel, equipment and accessory products. The company focuses its business on eight categories: Running, Basketball, Football (Soccer), Men’s Training, Women’s Training, Action Sports, Sportswear (sports-inspired lifestyle products) and Golf. Nike sells its products through Nike-owned inline and factory retail stores and Internet websites.
Nike has a market cap of $91.43 billion, a P/E ratio of 25.12, an enterprise value of $88.38 billion and a P/B ratio of 7.42.
Hussman may have purchased a stake in Nike for the following reasons:
- Nike is a world-renowned brand with good financial strength and a 29.57% return on equity. This gives the company a differentiation advantage and ranks it above 92% of the companies in the Global Footwear & Accessories industry.
- Nike has been able to outperform the Standard & Poor's 500 index total returns, the Dow Jones U.S. footwear index and the S&P 500 apparel, accessories & luxury goods index over the previous five years.
Below is a graph of a five-year comparison of cumulative total returns for Nike Class B common stock, the Standard & Poor’s 500 stock index, the standard & poor's apparel, accessories & luxury goods index and the Dow Jones U.S. footwear index. Each of the indices assumes that all dividends were reinvested on the day of issuance.
The graph assumes an investment of $100 on May 31, 2010 taken from Nike's most recent 10-K filing.
- Nike has reported good revenue growth (10%), EBITDA growth (10%), operating income growth (9.90%) and book value growth (10%) over the previous 10 years.
- Nike also has a dividend yield that is close to its two-year high at 1.14%.
Below is a Peter Lynch Chart for Nike.
Conclusion
Nike is a world-renowned company in the global footwear & accessories industry. It has been able to outperform the S&P 500 index total returns, the Dow Jones U.S. footwear index and the S&P 500 apparel, accessories & luxury goods index over the previous five years. It has good, consistent financial statements, and its dividend yield is close to a two-year high. All of these may have influenced Hussman to purchase a stake.
Cheers to your investment success.
Disclosure: Author does not own any shares of this company.
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