NKE Stock Stands Out—Again
In what’s been a terrible week for the broader market, Nike Inc (NYSE:NKE) stock’s been holding up strong. Its share price performance beat many other Dow components and the main market indices this week.
This is a testament to how institutional investor sentiment regards this stock. It’s a telling indicator—a positive one for the rest of this year.
While the broader market is going haywire, Wall Street earnings estimates for Nike have been ticking higher. A number of Street analysts recently boosted Nike’s earnings prospects for the company’s next fiscal quarter and its next fiscal year.
In a down market, upward earnings revisions are a rarity and it’s as good a reason as any to be looking more closely at this existing winner.
The chart for Nike stock is featured below:
Chart courtesy of www.StockCharts.com
As I’ve written before in these pages, Nike is an attractive, blue-chip stock for a slow-growth world. It offers investment-grade portfolios a great “package” of positive attributes that many other large-cap companies can’t offer.
The company’s sales and earnings growth forecast for the next several years are way above the general economy. Earnings-per-share (EPS) growth for this mature, large-cap enterprise is expected to be robust. Nike stock offers an approximate one-percent dividend yield currently and the company plans to continually repurchase its shares going forward.
Risks for Nike include currency translation, as many U.S. multinationals have to deal with a lot of currency weakness abroad. Another is competition, but Nike deals effectively with its rivals.
I view a position in Nike as recession-resistant. This is an important quality for a stock to have if considering new investments in this market. Even in a rising interest rate environment, customers aren’t expected to postpone orders.
During the stock market’s recent sell-off, Nike’s trading volume increased significantly and on many days, the stock did much better than the Dow Jones Industrial Average, the S&P 500 index, and the NASDAQ Composite.
This is important and it signals a move by institutional investors towards earnings safety and predictability, along with a desire to own quality picks in times of stock market turmoil.
Where Nike Stock Stands Right Now
I would say that Nike’s share price is fully to slightly overpriced right now, but this isn’t necessarily a hindrance. The shares have been like this for years for the simple reason that they are in demand.
There are always lots of questions to ask during stock market corrections. It’s important to re-evaluate your portfolio risk and the validity of each single holding within it. The fact that NKE stock is outperforming a market in turmoil illustrates the attractiveness of this kind of Dow component.
Sectors like energy, basic materials, industrial goods, and manufacturing are on the ropes. This is why a unique holding like Nike makes for a welcome addition to a diversified portfolio. It’s safe to call the position a “special situation” in an otherwise tumultuous market for stocks.
Please note that this article is not meant as a “Buy” recommendation for NKE stock; rather, it is meant to illustrate the kinds of qualities investors should look for in stock picks at this time.