A commitment to value-oriented investing can make you a bit twisted at times. For instance, Nike (NYSE:NKE) is selling off today as the company's pretty soft future orders numbers has started up the drumbeats of whether this global footwear and sportswear brand can continue to grow.
With apologies to those who are already long the shares, I say, "Keep it up, guys!" After all, if the sellers keep pushing Nike down, the shares look all the better to investors like me who like picking up well-known brands and solid businesses on dips in the market. Pull up a three-year chart of McDonald's (NYSE:MCD), Disney (NYSE:DIS), or Tyco (NYSE:TYC), and you'll see what I mean.
Admittedly, this quarter wasn't exactly anything to kick up your heels about. Revenue was up 10% overall, and while the U.S. and Latin American businesses did well, performance in Europe and Asia was pretty pathetic. Nevertheless, the bottom line still showed earnings per share climbing 18% a year, and that's not too shabby for a company worth more than $21 billion in total.
As for those futures orders, the total number grew 2.5% to $5.2 billion overall. Order growth looked all right in the U.S., good in Latin America, weak in Asia, and pretty poor in Europe (down 6%). Given that the company gets about one-third of its revenue from Europe and a fair bit of its profits as well, there is a legitimate reason to be concerned about this softness.
Still, I don't see a compelling reason to panic just yet. The combination of Adidas-Salomon and Reebok (NYSE:RBK) will indeed create a formidable competitor, but Nike still looks to be No. 1. And who's to say that Nike couldn't make an acquisition of its own? Buying privately held New Balance, for instance, could be an option.
Barring a really major shift in fashion tastes or some truly monumental development and/or marketing flops, I think Nike will come through this sluggish period in footwear just fine. In the meantime, value vultures like me should keep an eye on these shares just in case panicked analysts and disgruntled hedgies take the shares from "interesting" cheap to "come to papa" cheap.
For more Foolish tog takes:
Tyco is a Motley Fool Inside Value recommendation. Reebok is a Motley Fool Stock Advisor pick.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
