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When investing, it is important to pick core positions that will provide a good long-term return. With bond yields extremely low, investors need a way to receive a consistent return with lower risk. Nike (NYSE:NKE) is just the company to help investors receive consistent return for the long marathon for future returns. Nike is a buy for an investor looking for a position to hold for the next few years and here's why:

Nike is Still Strong and Growing

Nike is an athletic shoe juggernaut. It has a 50% market share of the wholesale shoe market according to the S&P. It is strongly diversified globally and has diverse product lines. It has been able to innovate with Nike+ and shoe technology, including its new Flyknit materials. Its shoes are in almost every large athletic shoe retailer and is one of the most recognized brands in the world.

In Q2, Nike reported an increase in revenues of 7% with an 11% increase in its global business. In North America, revenues grew by 17%. This growth outpaced management's expectations and showed Nike's ability to generate revenue despite a sluggish U.S. economy. Nike also saw continued growth in the emerging markets Brazil, Mexico, and Argentina. In fact, those markets grew 18%, which accounts for the 13th consecutive quarter of double digit growth.

The Next Few Miles Look Promising

Nike is well positioned to continue its dominance in the athletic retail market. Nike has set out to achieve some ambitious 2015 goals. These include:

  1. Growing its direct-to-consumer business from $2.2 billion to $5 billion.
  2. Double-digit growth in emerging markets and mid-single digit growth in developed nations.

Also, Nike is working on implementing a long-term strategy in China that will help its sales inside the country grow as the Chinese middle class begins to utilize more of their disposable income. If China begins to provide Nike the same double-digit growth it is seeing in other emerging markets, it could propel Nike to even higher growth. In fact, S&P expects China to generate $3.5 billion by 2015.

The company is also seeing a surprising trend in Europe when it comes to basketball. Interest in shoes and apparel have increased surprisingly over the past few quarters. While this may just be a short-term trend, it may help Nike weather the storm of a weak European economy.

Nike also saw a 19% increase in its apparel business. This was driven primarily by its contract with the NFL. This contract started in April 2012 and is for five years. This will continue to bring in substantial sales for Nike, especially if the company begins to create alternative uniform designs for many NFL teams. Alternative uniforms has been one of the many reasons there has been excitement about Nike's contract with the NFL and may produce serious positive results.

Valuation

I believe Nike is poised to hit a growth target of around 7.27% for the 3-5 years. This may be a conservative estimate considering the continued performance of management to deliver on their goals. With this growth target, Nike is relatively fairly priced. I see an intrinsic value of $56.98 per share discounting future dividends, and Nike is currently trading at around $55 per share. As I said earlier, this includes a conservative growth target.

Is Nike a Buy?

In my opinion, Nike is a buy if you are an investor looking to replace the low return on bonds and to benefit from global diversification. Also, Nike is paying you to own, not trade, their stock. At the same time, Nike is still a good growth story that has a pretty consistent track record. Nike is a very good fit for marathon investors who want to benefit from global growth without the risk of other apparel stocks.

Source: Nike: Perfect Fit For The Marathon Investor