Keep Your Portfolio Fit

AnnaLisa is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Diet and exercise, the three most boring and unheeded words uttered by doctors. Not even two weeks into the New Year and you can't get away from the Weight Watchers, Nutrisystem, and Medifast commercials. Seriously, I can't hear the satisfying crunch of my Cool Ranch Doritos over their blather.

Easy Way Out

Never underestimate the American penchant for gadgets and the easy way out to fitness. Nike (NYSE: NKE) has combined the two with their Nike+ Fuelband, retailing for $150, a wristband with accelerometer that basically does what a pedometer does except it also allows you to challenge yourself against your exercise buddies, tracking calories burned and activity level.

It's interesting that the Fuelband is available at the Apple store as it can be synced to any iOS device, Mac or PC. There is also a free app available at the iTunes store to use with the Fuelband. While this doesn't necessarily move the needle for Apple (NASDAQ: AAPL) it's certainly a forward-thinking move for Nike and its competing fitness wristbands by Jawbone and Lark also sync up to the iPhone. It is a reflection of the ubiquity of Apple devices that all three are hitching their star to Apple with only a slight nod to Android.

The Fuelband is also a very attractive design looking like the best Retro Modern jewelry. I haven't used it, but a reviewer for Time Magazine in the January 14 issue liked Nike's Fuelband best of these for the long term. Nike hasn't missed social media either as a wearer can share their achievements on Facebook, Twitter, or Path. Great, more boring posts to ignore. I have no doubt this will be a popular fitness gadget that will be adopted and just as soon put away in a drawer but that doesn't mean Nike won't make money from it.

Nike has also pushed this personalization trend big time with Nike ID where you can customize hundreds of their most popular shoes by color, print, graphics, traction, etc. The company has also re-released several of their most popular styles of the past, the Air Jordan 11 Retro (the holiday season debut enjoyed the best single day release for Nike) and the Air Max OG collection in four of the most popular colors. The company is not just all shoes and activewear. It also sell the youthful Hurley sportswear line and sports equipments: balls, bats, golf clubs, timepieces, protective gear etc.

Numbers Are The Story

It's hard to believe that current CEO Mark G. Parker was only eight years old when the company was founded. Parker has been making some bold moves, shedding the Cole Haan shoes line and Umbro soccer line, splitting the stock, and buying back shares. Coincidentally, he owns 662,916 shares as of December 30. The Vanguard Group holds a 5.12% stake with 36,931,838 shares.

Nike has a P/E of 23.66 with a forward P/E of 17.66 and a yield of 1.60%. The stock has underperformed the S&P 500 only up 5.85% compared to the S&P 12.78% rise. Nike as a stock had been flagging due to China sales disappointing over the last year. At the Q2 earnings release on December 20 the company reported better than expected revenues of $6 billion and EPS at $1.14 and future orders were up 6%. On the downside, gross margin decreased and China sales disappointed again. With the China ETF, the FXI rising, more and more companies are seeing China as the place to go for outsize profits with the second largest market in the world and Chinese demand extremely strong for recognizable brand names. CEO Mark Parker vowed Nike would be selling off Chinese inventory and revising merchandise to better suit Chinese tastes.

Going Forward

Analysts like Sam Poser of Sterne Agee, the "axe" of footwear analysis, gave Nike a "neutral" recommendation and added the China turnaround will take time. Analysts are really all over the map on Nike and its closest rival Under Armour (NYSE: UA) . Under Armour is trading at a much higher P/E of 45.19 and has no yield. It, too, split recently so the share price of Nike looks more affordable since the split. Under Armour reports on January 21 and Nike analysts will listen closely to the Under Armour call.

I like this new take on technology that Nike is introducing. By the spring they will be mentoring 10 small companies who will design similar innovations to the Fuelband for the Nike+ Accelerator program. However, Nike may be fairly valued right here and analysts give it a price target of $54.51. As for Apple, this is not a game changer for them, merely a validation of the place they hold in our lives. While the New Year's resolutions to get fit and lose weight haven't yet fallen by the wayside, the Fuelband is still only one gadget, cool as it may be, and Nike needs to address the problems with China sales.

leglamp has no position in any stocks mentioned. The Motley Fool recommends Apple, Nike, and Under Armour. The Motley Fool owns shares of Apple, Nike, and Under Armour. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

blog comments powered by Disqus