) is an anchor stock in the
Emerging Money Global EM Index
and also a key component of the
Emerging Money Global Consumer Index
In many ways Nike represents two key themes we see in the current
- This is a dominant global brand that is benefiting
from growth in emerging markets and also global wellness
- Nike is a company that is trading at a premium multiple to
its longer term history, and this valuation must be justified
through continued above trend growth or investors will punish
the stock at the next miss.
Nike doesn't report until March 20
but even after a pullback the stock trades at around 25x
current earnings and 24x estimated 2014. This is a significant
premium to the previous level the stock traded at over the
period from 2007-12 (18x). While this multiple is rich to
its own history, Nike still trades at a discount to its peers
(28x) and its main global competitor Adidas. Weighing
valuation and growth with return on equity (ROE), Nike is a
superior play to more expensive smaller players like Sketchers
(38x) and Puma (34x).
After what has been an 8% pullback off the highs the stock is
oversold when measuring RSI (29) and appears to be reasonably
well supported around $69.00, the 200mda. The move
lower has the stock back to levels of late Sept after Nike
reported a big beat on their fiscal Q1 '14 earnings. Many
investors have been waiting for a pullback to either reengage or
buy the stock outright.
We continue to believe this is an iconic brand growing with
the world around it, operating in an effective duopoly with
Both of these companies have size and scale to drive
pricing and push cost effectiveness with suppliers.
The Emerging Money Global EM Index (EMGEI) was 1.64% this