Based in Oregon Nike (NYSE:NKE) is a giant manufacturer of sneakers and other sportswear. The company is facing trouble overseas, but value investors should hoard NKE stock, not flee it. Of course, it’s not emotionally easy for most people to buy a stock when it goes down. If you want results like Warren Buffett and Charlie Munger, you should get into the habit of buying while others are selling.
The NKE share is a perfect example. The stock has reached $179.10 in the last 12 months. However, it now sits at $112.66 per share. Additionally, surprisingly, Nike’s stock price fell 5.9% on May 5, then fell another 3.49% on May 6. Clearly, the market was in a risk-taking mood regarding Nike.
Back-to-back declines of this magnitude don’t happen often with NKE stock. Before you jump in and buy the dip, however, it’s important to know what caused the selloff. First, mega-cap stocks were reeling as traders feared the fallout from the Federal Reserve raising interest rates this year. Still, there’s more to the story here, and that involves Nike in particular.
Nearly 20% of Nike’s sales would be linked to china. Meanwhile, Baird Analyst Jonathan Komp warned that conditions in China were actually worse than at the start of the Covid-19 pandemic. Komp has observed issues in China, such as retail store closures and reduced traffic in stores that are still open. So it’s not hard to see why investors are so nervous about NKE shares now.
Thus, investors have a choice to make: succumb to their fears or get into the trade. After the stock price plunge, Nike now has a 12-month price-to-earnings ratio of 29.73. In other words, the stock is trading at a very reasonable valuation. Additionally, Nike is still a global company with demonstrated revenue growth. In fact, Nike saw a 5% year-over-year revenue acceleration during the company’s latest campaign. quarterly financial report.
There is always an excuse to panic sell your NKE stock if you are looking for one. This time it’s problems happening in China. Value investors shouldn’t make excuses, though. Instead, they should consider buying Nike stock and holding it with conviction.
As of the date of publication, David Moadel had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.
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