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Put Your Investment Shoes On with Nike but Avoid Caterpillar

Don't Time The Market With Nike

Summary

  • Nike’s association with FC Barcelona is huge.
  • Revenue contribution of ‘Greater China’ has been climbing since Q1 FY14.
  • If the Chinese are willing to buy Nike’s premium footwear and apparel in difficult economic times, they will only spend more on Nike when economic growth accelerates.
  • China’s growing fitness industry represents a terrific opportunity for Nike.

By S. Hasan Abid

Nike is one of the most recognized brands in the world.

When it comes to brand recognition, there are very few companies in the world that can give Nike (NYSE:NKE) a run for its money. Nike isn't a business that merely sells apparel or athletic footwear, it thrives by selling its brand.

The reason why Nike is a terrific company is that whenever you think that its revenues are reaching an ominous saturation point or growth is slowing down, it surprises you by finding new avenues of growth, reinventing ways to strengthen its brand. A couple of weeks ago Nike extended its current sponsorship deal with FC Barcelona and now, until 2026, we'll be seeing Nike supply kits for the reigning Spanish champions. This deal, worth at least £100 million per season, is being touted as the most expensive kit deal in history and could play a key role in fueling Nike's footprint in Europe and Asia... CONTINUE READING



Caterpillar: Stay Away

Summary

  • Caterpillar has reported lower revenues and lower earnings for five consecutive quarters.
  • The company offered analysts lower guidance in its latest earnings report.
  • Economic and industrial forecasts for the near term are less than promising.
  • So, why has this stock rallied more than 30% since January?

By Tony Termini

When Caterpillar (NYSE:CAT) reported Q1 2016 earnings on April 22nd, management told analysts that they were lowering their sales and revenue guidance by about 2% for the remainder of 2016 and cautioned that restructuring costs would go up. This is the fifth time in five quarters that they've reported lower numbers and offered cautious guidance.

There are lots of reasons for the continual declines and they affect every one of CAT's operating segments. Lower energy prices have hurt CAT in both its Energy and Transportation business as well as its Resource Industries segment. Weak prices have caused reductions in exploration and extraction. And, this has led to a decrease in the volume of equipment sold into both the oil and gas and mining sectors. The result of this for CAT has been about a 10% decrease in revenue in Energy and Transportation and a nearly 35% revenue decrease in Resource Industries since 2013. The Construction segment didn't help in 2015 as it had the year before. Revenues declined more than $2.8 billion from 2014. In the aggregate, sales are off more than $8.6 billion, or nearly 15%, since 2013... CONTINUE READING

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