Q Nike Inc. always seems to be encountering controversy. What is your opinion of its shares?
P.B., via the Internet
A There’s a lot more to the world’s largest athletic shoe and clothing maker than controversy over spokesmen Tiger Woods and Ben Roethlisberger or even the University of Wisconsin’s decision to cancel its licensing agreement over concerns about Nike’s treatment of workers in Honduras.
The home of the “swoosh” expects overall revenue to rise more than 40 percent, to $27 billion, by 2015, boosted by its namesake brand and lines it owns such as Converse. Lightweight Lunar Glide running shoes and Pro Combat football gear typify its constant stream of new products.
Nike “B” shares (NKE) recently were up about 9 percent this year after last year’s 30 percent gain. On confidence boosted by strong profits, it announced plans to buy back more than $5 billion in shares the next five years.
Economic concerns in its industry include consumer spending, excess inventory, vulnerability to foreign currency volatility and trade issues. Changing fashion preferences also can have an effect.
Consensus rating on Nike is “buy,” according to Thomson Reuters, consisting of five “strong buys,” six “buys” and 10 “holds.”
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Earnings are expected to rise 1 percent this year, versus the 12 percent expected for the apparel, footwear and accessories industry.
Q What can I expect from American Century Equity Growth Fund?
B.L., via the Internet
A Since it aims to do a little better than the Standard & Poor’s 500 over the long haul, that’s pretty much what you can expect. This fund keeps its sector weightings fairly in line with that benchmark, making it best-suited to conservative investors seeking tranquil waters. It also has modest expenses.
The $2.1 billion American Century Equity Growth Fund (BEQGX) recently had returned 26 percent in the last 12 months to rank in the top quarter of large growth and value funds. Its three-year annualized decline of 9 percent places it in the lowest third of its peers.
“If you buy this fund expecting it to outperform the S&P by just a couple of percentage points, you won’t be disappointed and can put it in your portfolio and leave it alone,” said Karin Anderson, analyst with Morningstar Inc.
Its experienced management team is headed by William Martin, on board since the fund launch in 1997, and Tom Vaiana, who has been with it since 2001. According to filings, Martin has $100,000 to $500,000 of his money in the fund, while Vaiana has $50,000 to $100,000.
The computer models select stocks by looking at low valuations, growth rates and price-momentum factors. American Century Equity Growth Fund invests primarily in large U.S. companies with market capitalization greater than $2 billion.
Financial services is its largest concentration at 15 percent, followed by hardware, health care and consumer goods.
This 1 percent load (sales charge) fund requires a $2,500 minimum initial investment and has an annual expense ratio of 1.7 percent.
Q Do mutual fund managers have their own money in their funds? Is there significance to this?
F.P., via the Internet
A A manager’s investment is one of many factors to be considered when selecting a mutual fund. The logic is that an invested manager has interests aligned with shareholders and confidence in its strategy.
“As an investor, I would want to know whether a portfolio manager has any skin in the game,” said Wayne Thorp, financial analyst with American Association of Individual Investors. “You can find manager ownership levels and fund ownership policies in the ‘additional information’ section of a fund’s prospectus.”
A study by Morningstar last fall found managers of 51 percent of funds it tracked the previous five years had no stake in their own funds, while funds whose managers invested $1 million or more in their fund outperformed 58 percent of their peers.
“You still must use judgment and look at expenses and tax consequences,” said Mark Balasa, co-president of Balasa Dinverno Foltz.
Andrew Leckey answers questions only through the column. E-mail him at [email protected].