Shares of Nike Inc. (NYSE: NKE), Under Armour (NYSE: UA)(NYSE: UAA), and Foot Locker (NYSE: FL) are moving higher again on March 26. As of 12:49 p.m. EDT, shares are up 7%, 9%, and 8% respectively on a strong day for stocks. Both the S&P 500 and Dow Jones Industrial Average indexes are up 5% so far today.
Today's big surge marks the third day in a row that these companies are seeing their stocks move higher. The uptick began Tuesday, when word came out that Congress was moving closer to finalizing an economic rescue package that's now worth $2 trillion. The bill includes both aid to businesses and payments to individuals, and investors are increasingly hopeful that this will help soften what has been expected to be a pretty hard landing for the economy.
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There's also been some optimistic news out of Asia. Nike reported earnings earlier this week, with management reporting that business in China is starting to recover much more quickly than anticipated. That's a positive indicator for Under Armour, which also relies on China and much of Asia for its business and growth prospects, but it's also good news for Foot Locker. That company also has substantial retail operations outside of North America, and has said that while its North America, Europe, and Malaysia stores are closed, its locations in the Asia Pacific region remain open, subject to direction from governments in those regions.
Investors over the past few days have enjoyed some nice gains. Shares of Nike are up 35%, Foot Locker is up 38%, and Under Armour's two share classes are up 25% and 26% respectively, just since Tuesday.
But I think it's important now more than ever for investors to practice some caution. The market has run hard and fast this week, with the S&P 500 gaining 16% and the Dow surging almost 20% in the past three days. We are yet to really see any economic data to comprehend how the economy is being affected, and cases of COVID-19 are surging, as is the number of people dying after infection.
To put it bluntly, we very well could see stocks stop climbing and start falling again in the weeks to come, as the full implications of the economic harm -- on top of the health toll -- become apparent. And that could put companies like these three, which make and sell discretionary goods, at risk.
That's not a call to sell on the big gains we have seen so far. To the contrary, I think all three still represent good values at this price. Foot Locker and Under Armour shares are all still down 40% from their February highs, while Nike is still down 19%.
So selling at this point -- on the short-term risks that their stocks will start falling again -- could prevent investors from profiting from the best gains. When we beat COVID-19, and things start to return to normal, all three companies will benefit from the economy's recovery. At recent prices, investors would do well to look out a year or two, or ideally a decade, and consider the prospects for much bigger gains.
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Jason Hall owns shares of Foot Locker, Under Armour (A Shares), and Under Armour (C Shares). The Motley Fool owns shares of and recommends Nike, Under Armour (A Shares), and Under Armour (C Shares). The Motley Fool has a disclosure policy.
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