It’s very hard to not like Nike (NKE).
This diversified sports product company continues to grow at double-digit rates in a world that is barely seeing positive growth.
It is growing its market share in sluggish economies in China, Europe and South America, and continues to post great U.S. numbers as well.
NKE is emblematic of the story beneath the story in emerging economies such as China. While most people see GDP growth in China shrinking from 10% or 12% per year to 7%, they draw the wrong conclusion from that.
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Yes, the broad market is contracting, but that doesn’t mean the enormous growth of the middle class has disappeared. There are still tens of millions of new consumers interested in upgrading their possessions.
People don’t run out and buy a new house and new car when they get a raise. They buy a new suit and some nice shoes. They get a new vacuum cleaner or tennis racket.
But, all of these small purchases, on a massive scale, amount to growth that continues in these markets. And NKE is one of those world-class brands that people are interested in buying to feel like they’re more connected with the affluent class.
Nike Stock and the Global Economy
What’s more, in China there’s chaos surrounding the government’s efforts to unpeg the yuan from the U.S. dollar and devalue the currency. This has sent many Chinese scrambling to convert their yuan before it loses significant value.
This also benefits Nike stock because, the more money that floods into the system, the more money that is headed its way. Remember, NKE has scores of collectors who buy and sell its shoes, similar to the way other people may buy art or gold. Some shoes actually store value, or more bluntly, they’re as good as gold.
But, the larger point is NKE is where the growing middle classes of the world are choosing to start going up-market. While we hear of the global doldrums, and while the central banks continue to cut rates to boost economies, individuals continue to seek out their small pleasures.
In the U.S., which is a beacon of growth in a sea of mediocrity, NKE has just inked a $500 million lifetime deal with basketball star LeBron James, an 11-year $169 million deal with the University of Michigan, and a 15-year $250 million deal with the University of Texas. All those deals have come in the past six months. There’s a lot of growth to come for Nike stock.
What’s more, given rising rates in the U.S., and a correspondingly weaker dollar, exports will help keep margins high. Institutional investors will look to more growth-oriented companies as higher rates will start to hurt classic hedges such as utilities.
Up 36% so far in 2015, there’s still plenty of growth in 2016 and beyond for NKE.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
