This post is part of my series featuring established companies and the smaller, more aggressive or innovative rivals that may eventually succeed them.
"From sea to shining sea" aptly describes the distance between Nike (NYSE: NKE) and Under Armour (NYSE: UA). Nike is headquartered in Beaverton, Oregon, while Under Armour calls Baltimore, Maryland, home. Nike splashed onto the scene locally in Oregon in 1964 and has developed a true international brand. With the likes of Michael Jordan, Joan Benoit Samuelson and Tiger Woods serving as spokesmen for the company, Nike has transcended virtually every sport and every demographic group.
Under Armour, founded in 1995, at first appealed to the serious athlete with its moisture-wicking synthetic fibers that help keep sweat and moisture from the skin and help regulate body temperature during strenuous exercise. Under Armour then discovered it was unwittingly creating a fashion statement. Like Nike, Under Armour is also crossing over to various demographic groups and weekend warriors as well.
Nike has the famous Swish as its corporate logo, while Under Armour has branded the bold U over A insignia. Nike has established its brand globally with a dual strategy of major retailers selling its apparel and shoes and its own distribution system. Nike has over 250 NikeTown stores in the United States and over 230 internationally. With the retail store system Nike can control the entire purchase from apparel to shoes to socks to sweatbands. Under Armour has just begun its own retail stores with two prototypes, one in Maryland and one in Illinois. It sells its various products through multiple channels, including its own user-friendly e-commerce web site.
Small Stocks, Big Potential Little companies get less attention from investors, but they can often provide handsome returns. Here are 21 top picks in the group from investing pros. Small Wonders - BusinessWeek
Hot Growth, Against All Odds Here is BusinessWeek's list of fastest-growing small companies. Can they sustain their stratospheric growth? Topping the list is Hansen Natural, LuluLemon Athletica and Graham. Other hot growth companies include J.Crew, Morningstar, Nutrisystem, Quicksilver, Gymboree, Blue Nile, Strayer Education and Under Armour. Hot Growth, Against the Odds - BusinessWeek List: Hot Growth Companies
UA June call option implied volatility is at 53, puts are at 64; above its 26-week average of 52 according to Track Data, suggesting larger price movement. UA puts volatility is higher than call volatility because UA is difficult to borrow.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
I know, I know, with the economy sputtering, why would you ever want to be invested in an apparel company that produces expensive jeans? Let alone have it recommended by a typically short-selling trader like me! But before I tell you the name of this stock that despite the obvious economic problems -- strong oil, weak housing and the dollar, mounting foreclosure, etc -- is sitting right near all-time highs, looking to break out, let's do a quick rundown of its competitors in the apparel retail space.
Under Armour, Inc. (NYSE: UA) shares are falling after the company reported a first-quarter profit of $2.9 million, or 6 cents per share, beating analyst forecasts of 3 cents per share. However, the company also lowered its 2008 profit forecast to between $103.5 million to $104.5 million, from a previous estimate of $108.5 million to $110.5 million, which is giving investors reasons to worry. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on UA.
After hitting a one-year high of $73.40 in August, the stock hit a one-year low of $25.32 in January. This morning, UA opened at $34.54. So far today the stock has hit a low of $33.80 and a high of $36.87. As of 11:55, UA is trading at $34.89, down $3.69 (-9.6%). The chart for UA looks neutral and deteriorating, while S&P gives the stock its highest 5 STARS (out of 5) strong buy rating.
For a bearish hedged play on this stock, I would consider a June bear-call credit spread above the $45 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 4.2% return in seven weeks as long as UA is below $45 at June expiration. Under Armour would have to rise by more than 29% before we would start to lose money. Learn more about this type of trade here.
This post is part of our Battle of the Brands feature. Let us know which brand you prefer, and check out other Battle of the Brands posts.
The story of Nike Inc. (NYSE: NKE) and Under Armour (NYSE: UA) is just one more David and Goliath scenario. Just like in the biblical story, David's battle (UA) was more one of survival against the odds, while Goliath (NKE) truly did want to vanquish the diminutive challenger. Under Armour is capitalized at $1.28 billion while the long-established and legendary Nike has a capitalization more than 20 times the size at $26.38 billion.
NIKE, the world's #1 shoemaker, does more dominating than assisting, to capture more than 20% of the U.S. athletic shoe market. It designs and sells shoes for a variety of sports, including baseball, cheer-leading, golf, volleyball, hiking, tennis, and football. Under Armour is proving its mettle as an apparel warrior. Since its foray into the sporting goods market, the maker of performance athletic undies and apparel has risen to the top of the industry pack, boasting a big portion of the compression garment market.
In addition to playing a dominant role in the shoe market, Nike has retail and wholesale outlets that sell a broad range of branded sports gear, including clothes, watches, balls, hats, and an expanding array of accessories. Under Armour is expanding as well, trying to get a foot-hold (could not resist) in the shoe market starting with a series of cross-trainers. They hope to capture perhaps 10% of the market as they promote their up-and-coming brand.
"VMware is a market leader in software virtualization. Companies typically do not use the full computing power of their servers, and when not in use, that server sits idle.
"Virtualization technology allows IT managers to use that underutilized capacity -- running software across the organization's entire base of servers. Thus, virtualization is a key cost-cutting technology.
"VMware has a short interest ratio of 11.7 and a freely traded float of just 50 million shares. If all those shorts try to cover, the stock looks likely to be in short supply. Meanwhile, trading at 36 times 2009 earnings estimates with a long-term growth rate of 45%, VMW doesn't look overpriced.
"Under Armour (NYSE: UA) makes clothing (along with sports equipment) targeting the athletic and outdoor-oriented market. Specifically, the company makes clothes designed to wick moisture away from the skin and keep the wearer at a comfortable temperature, regardless of weather conditions.
"Meanwhile, the stock has seen strong earnings growth despite the slowdown in consumer spending -- earnings surged 42% in the fourth quarter. And management recently announced its looking for revenues to reach $765-775 million in 2008, representing around a 27% increase over 2007 levels.
"With a forward P/E of 23 and a long-term growth rate of 25%, UA looks inexpensive. With a float of less than 32 million shares and a short interest ratio approaching 12, Under Armour looks like a prime short-squeeze candidate."
Each day, Steven Halpern's TheStockAdvisors.com offers the latest market commentary and favorite investment ideas from the nation's leading financial newsletter advisors.
The currency of our realm, the US Dollar, has been losing value for many years, but lately the results of this sad state of affairs have become increasingly more evident. Concerns are mounting on a global basis not just in the United States. The euro, once pegged at a buck, is now trading at $1.55, while gold has passed $1,000 and oil has continued its charge, breaking through the $110 per barrel mark.
While a good deal of this problem is home grown, the pain is being felt all around the world. We have read many stories about how the American economy is a smaller part of the global economy and becoming somewhat detached. This is nonsense. What has happened is that the global economy has become infinitely more integrated and like any integrated structure (the architect speaking), what occurs in one place is felt everywhere.
The Federal Reserve Board, led by Chairman Ben Bernanke, has been watching the economy in an extremely measured fashion, bordering on casual. To those who see beyond Bernanke's calm demeanor, one should imagine a stock trader of old, holding the ticker tape up to his eyes and monitoring every change, every blip in the market as the ticker tape machine clicks away, spewing out the latest market activity.
Under Armour (NYSE: UA) shareholders may want to worry. Nike (NYSE: NKE) announced on Monday that it is launching Nike Sparq Training, which will combine "high performance products, online experiences at nike.com, a new association with Velocity Sports Performance Centers, and a multi-media campaign called 'My Better.'"
The product line will include footwear, apparel and equipment in partnership with Sparq Training.
This appears to be Nike's strongest attack on Under Armour's center of strength to date. And here's the problem: With a strong brand and financial resources that dwarf Under Armour's, Nike would appear to have a very good shot at crushing Under Armour's market share.
In a battle for market share, Nike can outspend Under Armour on advertising and sustain losses if necessary. As an aside, in my recent visits to discount stores like Marshalls and TJMaxx, I have found large quantities of Under Armour merchandise.
Under Armour has been a strong performer because of a first mover advantage, but as Charlie Munger once said, very few businesses have a future as good as their past. Under Armour's past success has attracted a deep-pocketed competitor, and that could hobble its future.
Earlier in the week I posted about finding the market bottom using that age-old handheld calculator, a white paper napkin. So, unfortunately it looks like I may be right again. Not exactly something I was hoping for, but if it has to be, it has to be. I wonder if my old napkin can outperform Wall Street super computers?
Is this an auction to the bottom? Are investors bidding things down instead of up? Looks like it from all the negative sentiment. Consumer sentiment is down, and short sellers are all excited, increasing their negative positions to new highs every day.
And here is the all-telling sign of capitulation: the ever-lying overly optimistic government is starting to admit how bad things are and throwing hundreds of billions of dollars at the problem. When does the turnaround come?
Rocky Market, Smart Strategies Indexing and dollar-cost averaging are always sound approaches to long-term investing, but right now they're especially timely. Rocky market, smart strategies - MONEY
CDs Safe Haven? Where to Find the Best Rates Has the wildly unpredictable stock market got you jittery? You can put your money into CDs instead. As long as they're insured, they're a sure bet. Here are some places where you can get the highest rates. CDs Safe Haven? Where to Find the Best Rates - TheStreet.com
MOST NOTEWORTHY: K-12 Inc., ChinaEdu and Cardtronics were today's noteworthy initiations:
Baird is positive on K-12 Inc. (NYSE: LRN)'s leadership position and growing market opportunity for expansion. The firm started shares with an Outperform rating and $26 target. Shares were also initiated at Morgan Stanley with an Equal Weight rating and at Credit Suisse with an Outperform rating.
Bear initiated ChinaEdu (NASDAQ: CEDU) with an Outperform rating and $11.20 target and said demand for post-secondary education in is outstripping the capacity of land based universities and that CEDU will benefit from the governments strategy to raise education levels. Piper, which started shares with a Buy rating and $10 target, believes the online higher education market is still in the relatively early stages as online student enrollments represent less than one-fourth of total university enrollments.
William Blair believes Cardtronics (NASDAQ: CATM) has a highly attractive opportunity to increase the number of ATM sites it operates. The firm assumed coverage with an Outperform rating.
Other initiataions:
MedAssets (NASDAQ: MDAS) was initiated with an Overweight rating and $24 target at Lehman, at Deutsche Bank with a Buy rating and $25 target and at Wachovia with a Market Perform rating.
Jefferies initiated VanceInfo (NYSE: VIT) with a Buy rating and $11 target.
Susquehanna initiated Under Armour (NYSE: UA) with a Neutral rating.
American Express (NSYE: AXP) was downgraded to "hold" from "buy" at Citigroup. According toMarketWatch the bank is concerned about the AXP earnings in 2008 and 2009.
This post is part of my series featuring established companies and the smaller, more aggressive or innovative rivals that may eventually succeed them. 
Under Armour
I know, I know, with the economy sputtering, why would you ever want to be invested in an apparel company that produces expensive jeans? Let alone have it recommended by a typically 
Here are some highlights from this past week's 
This post is part of our 
The currency of our realm, the US Dollar, has been losing value for many years, but lately the results of this sad state of affairs have become increasingly more evident. Concerns are mounting on a global basis not just in the United States. The euro, once pegged at a buck, is now trading at $1.55, while 
Earlier in the week I posted about .gif){kind=logo}
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Apple reports Monday -- buy AAPL before earnings?
