April 17, 2011 in Business

Nike great and growing, but watch for better price

Universal Press Syndicate

If you bet that Nike (NYSE: NKE) would beat its earnings estimates in its recently reported quarter, you lost. However, if you’re like most Foolish investors, you’re investing in companies for the long term, not making wagers on a single quarter’s earnings.

Beyond the headlines, things really aren’t so bad. Sure, Nike took a hit from rising commodity costs, but so did many companies. The selling and administrative costs that Nike can more easily control rose more slowly than revenue, pulling profits in the right direction – up 5 percent.

Nike’s total revenue grew 7 percent over last year. Future orders – which represent footwear and apparel to be delivered between March and July – were up 11 percent overall, jumping 11 percent in North America, 19 percent in China, and 21 percent in other emerging markets.

Was it an outstanding quarter? No. But Nike is still the same great company, and its business continues to grow around the world. The commodity issue isn’t ideal and will likely persist, but the value of a brand such as Nike is that the company is more able to pass on rising costs to customers.

Still, Nike’s stock doesn’t appear to be a screaming bargain right now. Consider keeping an eye on it, staying up-to-date with its developments, and watching for a more attractive buy-in price.

Ask the Fool

Q: Is it OK to use consumer credit counseling organizations to help me get out of debt? Do they have any downsides? – C.R., Indianapolis

A: Be careful with such outfits, as some can rip you off. Worse still, if they set up a debt repayment plan with you and a creditor reports to a credit agency that you paid off some debt through a debt management program, that could hurt your credit score to some degree.

Look elsewhere for help or advice, too. Discuss your situation with a trusted banker or mortgage officer, and perhaps consult a bankruptcy lawyer, as well, to learn about your options. Know that many people are able to pay off their debts without outside help. Learn more about credit card debt and how to get out of it at www.fool.com/how-to-invest/ personal-finance/credit/index.aspx.

If you want to look into counseling organizations, seek a nonprofit one. One resource is the National Foundation for Credit Counseling (NFCC), with many member agencies. Call 800-388-2227 or visit www.nfcc.org. But first heed these government warnings: http://www.ftc.gov/bcp/menus/ consumer/credit/debt.shtm.

Q: I just read a reference to “liar loans.” What are they? – J.W., Maryville, Tenn.

A: Liar loan is a term that popped up during the recent financial crisis. It’s a loan that’s made based not on documented necessary information (such as the borrower’s income or assets), but mainly on the say-so of the borrower. These low-documentation or no-documentation loans tend to be subprime ones, as many borrowers haven’t always been truthful about their financial conditions, leading to defaults. While these loans have helped many good people secure loans, they’ve also been abused by opportunistic lenders and borrowers – thus, the term “liar” loan.

My dumbest investment

I must be on lots of sucker lists. When I read a stock tip about Ventana Biotech having a way of delivering an appetite-suppressing drug in chewing gum, it sounded so good that I didn’t bother to check it out before buying. Later that same day I checked my portfolio, and the stock was down 30 percent. I bailed – except for 500 shares I kept to remind me not to buy before doing the due diligence. – J.G., online

The Fool responds: We found a 2009 newsletter touting the stock as “worth an estimated $1.5 to $1.7 billion in cash flow!” It declared that the company was planning to “blow the doors off of the diet industry” with its potentially patented use of the human hormone that controls hunger. It suggested that “when big (drug companies get) wind of this breakthrough,” the stock would “explode” (in a good way).

It would have been smart to demand proven performance, not just “potential” patents and speculation. If it were really so promising, drug companies would surely be aware of it already.

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