Nike and Under Armour have been called the "duopoly" of the athletic "techwear" phenomenon - today, UA confirmed that the techwear fad has legs, surging more than 20 points in one day. Momentum stock investors who stuck with UA despite analysts and pundits who kept carping about the high PE were richly rewarded. So what does this suggest for investment strategy?
I had already been accumulating Nike shares at the recent lows, plus some April call options since Nike reports earnings in March and the timing makes sense, even if there is a deep 10 or 15 % market correction in February as so many seem to be expecting. I am a long investor in Nike and I personally believe they did better over the holidays and during the pre-Olympics runup than analysts seem to be expecting.
For UnderArmour, although I'm almost always a long investor I did buy some $105 put options since the last few times that UA and NKE surged on news, they dropped back fairly quickly and I would expect to see UA back at 95 soon enough.
NIKE is positioning for its annual spring runup. If you check the charts you'll see that Nike typically falls after Xmas but then tends to surge in Feb. or March. This is the beginning of the surge and is fueled a combination of: 1) stronger than expected holiday sales by the athletic wear leaders, 2) earnings coming out in MARCH, and 3) Olympics buzz where Nike dominates the PR. Analysts are beginning to weigh in with higher price targets in the 80s. The best buy-in point was close to 70 which is where I bought shares and call options. This year I did well with Nike and Under Armour.
Bought my 600+ shares UA around $83 sold today at $104.70.
Will buy back on the retreat.
Have also been buying NKE again.
Had bought 900 shares around $64 and sold at $78 before the recent drop off.
Life is good!