1 Reason to Buy Nike Stock and Hold It for Decades


Over the five- and ten-year periods, Nikeit is (NYSE: NKE) the stock produced stellar returns of 129% and 353%, respectively, easily beating the S&P500. Investors who simply bought shares for no other reason than to like the company’s products would have done very well. In fact, this is the approach popularized by famed investor Peter Lynch.

However, thinking about stocks that investors can buy and keep for a long time, this is a business that is sustainable more than anything else. And that means staying relevant in the eyes of consumers, not just now, but far into the future.

Nike has proven in the past that it fits this description. I expect the same in the future. And that makes its stock an attractive portfolio addition for investors focused on the very long term.

Leverage your powerful brand

Nike competitive advantage stems from its powerful brand recognition, a key attribute that is not going anywhere. The company has a winning culture that is exemplified by its ability to introduce exciting new products that customers never seem to tire of on a consistent basis.

Signing top athletes like LeBron James, Cristiano Ronaldo and Tiger Woods to high-value sponsorship deals certainly helps boost brand image. In the company’s most recent quarter, demand generation spend — which includes these endorsement deals, as well as other branding and advertising spend — increased 20% year-over-year to reach $854 million. This strategy works because Piper Sandlerfrom spring 2022 Checking in with teens survey found that Nike is the most popular clothes and shoe brand by a surprisingly wide margin.

Two ongoing initiatives will help keep the Nike brand in the top spot. For starters, management is focused on tightening up its distribution strategy. Over the past four years, she’s decided to cut wholesale accounts by more than 50% in hopes of avoiding costly markdowns and maintaining better control over inventory. Additionally, investments made in digital capabilities as part of the Consumer Direct Offense strategy (and the Consumer Direct Acceleration update) are aimed at accelerating product introductions and deepening customer relationships.

Having an unparalleled customer mindset means Nike will stay relevant for a long time. And that will support the company’s success not just years from now, but decades from now. Investing continuously to maintain brand strength supports this perspective.

Image source: Getty Images.

Nike is not best in class

Even with all the positive features of Nike’s successful business, I still don’t think it’s the best investment in its own industry. In my opinion, this title go to lululemon (NASDAQ: LULU). It has seen much faster revenue and profit growth than Nike in recent years while achieving better margins. And its share price has soared 600% since May 2017.

But that prospect only reinforces my argument that Nike is a buy-and-hold stock. Investors, myself included, are still in love with the shiny new item. With its higher price-to-earnings ratio, the shining object is definitely Lululemon right now in the sportswear market. Still, I think the growing strength of the Lululemon brand, premium pricing, and growth potential are the main reasons I love it.

However, if I had to pick one stock for the next few decades (as opposed to the next five years), as the title of this article suggests, it would be Nike. And again, it’s about durability. Nike was founded in 1964, while Lululemon started in 1998. This means the former was more proven. And it has a longer and more proven operating history, which adds to the confidence in owning the stock in the future.

And that is what a buy and hold investment strategy is. It’s about trying to get adequate returns for as long as possible while building a portfolio that helps investors sleep well at night. Buying Nike stock can do just that. That’s about as close to “set it and forget it” as you’ll get in the stock market.

10 stocks we like better than Nike
When our award-winning team of analysts have stock advice, it can pay to listen. After all, the newsletter they’ve been putting out for over a decade, Motley Fool Equity Advisortripled the market.*

They have just revealed what they believe to be the ten best stocks for investors to buy now…and Nike wasn’t one of them! That’s right – they think these 10 stocks are even better buys.

View all 10 stocks

* Portfolio Advisor Returns as of April 7, 2022

Neil Patel has positions in Lululemon Athletica. The Motley Fool holds positions and recommends Lululemon Athletica and Nike. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


About Author

Comments are closed.