Nike is for the daring only

Posted May 12th 2009 2:00PM by Joseph Lazzaro
Filed under: NIKE, Inc'B' (NKE), Stocks to Buy

Nike (NYSE: NKE) is a Buy here, but the Stop is tight, hence no shenanigans will be tolerated. This is not a stock for the squeamish. Further, the Buy recommendation would have been generated sooner, were it not for NKE's move toward the $50 mark: there's something about the $50 level in difficult economic times that creates institutional investor hesitancy.

That said, the stock has shown some strength at these levels, hence a revisit of the $38 low for 2009 is not expected.

Nike's positives: a solid brand, great international growth opportunities, marketing expertise, and recently implemented costs savings stemming from a restructuring.

Nike's negatives: a failure to continue producing impressive sales gains in a key international market, China, where it registered $1 billion in sales in F2008, would weigh on revenue and the share price. The First Call F2009/F2010 EPS estimates for NKE are $3.76/$3.63.

Stock Analysis: Nike is a moderate-risk stock. Consider buying a 25% position in NKE now; then buy another 25% in three months, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your NKE position in the first half of 2009. Sell/Stop Loss if you were to buy shares in this company: $43.

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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

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