Q. What does the future look like for my shares of Nike Inc.?
J.T., via the Internet
A. This global company, which commands about 37 percent of the athletic footwear market, is fast on its feet. The day 15-year-old golf prodigy Michelle Wie turned professional, she received a four-year contract from Nike that will pay her up to $5 million annually. Her youth and intent to compete in some men’s events should help Nike Golf invigorate a lackluster golf market.
Fancy footwork is required to stay ahead of fierce competition. German sportswearmaker Adidas-Salomon AG has received U.S. regulatory approval for its $3.8 billion takeover of Reebok International Ltd., scheduled to be completed in the first half of next year.
That combination will have an estimated 30 percent of the world’s athletic shoe market. In addition, Reebok’s acquisition of The Hockey Company last year gave it the lead over the Nike Bauer Hockey subsidiary in sales of hockey apparel and equipment.
Nonetheless, the famous Nike brand and swoosh logo gives it great reach and allows it to charge premium prices. It is, for example, the top-selling brand in China. With a $200 million U.S. media advertising budget last year, Nike shows no signs of relinquishing sales leadership.
Amid continued market anxiety about the outlook for consumer spending, Nike Class B (NKE) shares are down 8 percent this year, following gains of 32 percent last year and 54 percent in 2003.
Chairman Phil Knight, who started the firm by selling track shoes out of his car trunk in 1964, owns a quarter of its Class B common stock. William Perez of S.C. Johnson was named president and chief executive late last year.
Net income rose 32 percent and revenue rose 8 percent in its recent fiscal first quarter on strong U.S. sales of styles such as Air Jordan. Expiration of quotas on imported apparel this year has given manufacturers greater flexibility on where clothing can be made. But about half of Nike sales are overseas in 160 countries, making it susceptible to currency fluctuations.
The consensus Wall Street recommendation on Nike is a “buy,” according to Thomson Financial. That consists of six “strong buys,” seven “buys” and four “holds.”
Nike has moved into low-priced sneakers with its Starter-brand footwear in Wal-Mart Stores, building on gains from its Hurley International and Converse acquisitions. Soccer offers growth potential, assisted by the firm’s involvement with World Cup competition and professional clubs.
Earnings are expected to rise 17 percent this fiscal year versus 10 percent expected for the apparel, footwear and accessories industry. Next year’s projected increase of 10 percent is in line with its peers. The five-year annualized growth rate forecast is 14 percent, versus 11 percent industrywide.
Q. In June 1999, we opened Education Individual Retirement Accounts for our children in Janus Twenty Fund. What are its prospects?
S.A., via the Internet
A. It should not be the primary holding for your children’s education money because there’s too much potential for volatility.
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Even though this fund owns 37 stock names rather than 20 as its name implies, the concentrated portfolio can be hit hard whenever several positions misfire. It performs badly in bear markets.
The $10 billion Janus Twenty Fund (JAVLX) rose 17 percent over the past 12 months to rank in the top 6 percent of large growth funds, while its three-year annualized return of 15 percent puts it in the upper 13 percent of its peers.
Currently closed to new investors, Janus Twenty does offer positives such as a low, 0.89 annual expense ratio and an experienced portfolio manager.
“Janus Twenty is for an aggressive growth investor and should be a very small portion of your overall portfolio, not a core holding,” said Gareth Lyons, analyst with Morningstar Inc. in Chicago. “Portfolio manager Scott Schoelzel is a talented stock-picker who does exceptionally well in up markets, but he takes sector bets, and the risks are now potentially as high as anytime in the past four years.”
In charge since 1997, Schoelzel late last year began betting on energy and has more than one-fourth of assets in that sector. With at least $100,000 of his own money in the fund, he selects fast-growing firms that dominate industries and is willing to hold a substantial cash position.
Besides energy holdings, health care accounts for more than one-fourth of Janus Twenty’s assets, with financial services and business services its other major concentrations. Top holdings were recently UnitedHealth Group, Genentech, ConocoPhillips, Electronic Arts, Nike, eBay, Bank of America, Wells Fargo, Roche Holding and Apache.
Schoelzel also runs the less concentrated Janus Adviser Forty (JARTX) and Janus Aspen Forty Institutional (JACAX) funds.
Q. My mother can’t find some of her stock certificates. What should she do?
R.R., via the Internet
A. Although there has long been a push to eliminate paper certificates, some investors prefer physical proof of ownership rather than keeping stocks electronically in their brokerage firm’s name.
But certificates must be kept in a safe place. Photocopy the front and back of each, keeping these copies apart from actual certificates, which should be stored in a secure place such as a safe-deposit box.
If a certificate is lost or stolen, check those photocopies for the transfer agent listed on the certificate. Lacking that, ask your broker, the company that issued the certificate or the SEC at http://www.sec.gov/answers/lostcert.htm for the transfer agent’s name.
“Contact the transfer agent immediately and request a `stop transfer’ that prevents anyone from transferring ownership of that certificate from your name,” advised Susan Wyderko, director of the SEC’s Office of Investor Education and Assistance in Washington, D.C.
To obtain new certificates, you must first purchase an indemnity bond that protects the company and transfer agent against the possibility of those lost certificates surfacing later. That bond, available through a bank or broker, usually costs 1 percent to 2 percent of the current market value of the certificates.
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Andrew Leckey is a Tribune Media Services columnist. E-mail him at [email protected].