Presented By: 🇺🇸Seeking Alpha Independence Day Special🧨

“You’re like a man standing by a stream, trying to spear a fish, and the fish only comes once a week, once a month, or only once every ten years. And you’ve got to be there to throw that spear fast before the fish swims on.”

-Charlie Munger at the 2008 Berkshire Annual Meeting

Nike’s (NKE) worst-ever one-day stock performance was due to weakening sales and lowered guidance after its Q4 earnings announcement on June 27th.

The next day, I opened my first-ever Nike position, 14 shares, with an average cost of $76.54, and hopefully speared a quality fish with a swoosh.

I also bought Nike while working on this newsletter from the family condo in St. Pete Beach, Florida, which overlooks the Gulf of Mexico.

Value investing is about buying and holding something when it’s beaten down by a temporary and solvable problem.

This should be the case with Nike.

My family spent the day of the Nike earnings release at Busch Gardens in Tampa Bay, Florida. There was no shortage of Nike products around the park…including Converse, another iconic brand Nike acquired in 2003.

Current management missteps, like fundamentally shifting the business model in 2017 and going direct-to-consumer (DTC), have put Nike behind its competition in many categories, leading to a 25% stock price drop this year and a 20% worst-ever decline on a single day.

But it’s still miles ahead of its competition, as seen in the 2023 worldwide athletic sales below.

Every company is a living, breathing entity whose first order of business is survival. If this holds true, management will take the necessary actions to turn Nike around to survive and keep dominating market share.

Historically, when Nike has become hyper-focused on innovation, good things happen for the business.

The Nike brand is iconic and will be very difficult to kill, so this is a long-term bet that it will survive any current management missteps.

Former CEO Mark Parker, who started as a Nike footwear designer in 1979 and served as Nike’s 3rd CEO from 2006 to 2020, had a fundamental understanding of the company and its industry.

Nike shook things up in 2020, bringing in John Donahoe as its fourth CEO. Besides being on the Nike board of directors, Donahoe had minimal experience and came from leading tech businesses like PayPal and eBay.

It’s somewhat reminiscent of Intel (INTC) bringing its CFO (Chief Financial Officer), Bob Swan, to the helm. This didn’t work out, and the company turned to Pat Gelsinger, who was once Intel’s CTO (Chief Technical Officer) and was in the trenches with the company’s nuts and bolts to turn the company around.

If Nike’s industry performance and stock price continue to trend in the wrong direction, we’ll see another shakeup and likely a “going back to their roots” for the 5th CEO in company history.

As Howard Marks said, “You don’t usually make much money by betting on the thing that everybody else loves. The big money is made by betting on the things they hate, which as a result are cheap, if you’re right.”

And right now, Nike is getting tons of hate.

If a company’s product is the horse, then the CEO is the jockey…and the current Nike jockey is underperforming.

The Nike horse is still globally iconic, and I’m betting it will survive the current jockey’s control. Nike has historically been a very high-quality business with impressive profit margins and dominant market share.

They have fast dividend growth and a current SimplySafeDividends.com safety score of 99 - Very Safe.

If you had bought Nike ten years ago, you'd have a total return of 115% and a yield on cost of 3.8%... and that's after the share price's significant decline this year.

Warren Buffett is fond of saying that he loves to invest in businesses an idiot can run because someday one will.

Is John Donahoe an idiot? The jury’s out on that one.

But I do know that time reveals the truth, and if Mr. Donahoe proves incapable, this jockey will be sacked, and another, more capable rider will steer the Nike brand into the future.

I’m happy to be along for the ride, but would you invest in Nike? Hit reply and let me know.

😁THANK YOU to everyone who responded to the last newsletter!!

Check out the portfolios and podcasts, or see what’s cooking on YouTube.

And now, here is this week's portfolio activity.

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Dividends Received ~$406.40

• Lockheed Martin (LMT) | $31.50
• PepsiCo (PEP) | $135.50
• Ares Capital (ARCC) | $194.40
• Main Street Capital (MAIN) | $45.00

Dividends Received Year to Date~

$3,813.49

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Stocks Sold (AVERAGE)

• (50) AT&T (T) | $19.01

Stocks Bought (AVERAGE)

• 3 Agree Realty (ADC) | $61.51
• 1 Johnson & Johnson (JNJ) | $146.51
• 14 Nike (NKE) | $76.54
• 1 Visa (V) | $268.25
• 1 VICI Properties (VICI) | $28.29

Notable Ex-Dividends This Week + SSD Score

• 7/1 Realty Income (O), 5.98% | 80S
• 7/3 Bank of Nova Scotia (BNS), 6.80% | 70S
• 7/3 Comcast (CMCSA), 3.17% | 89VS
• 7/5 American Express (AXP), 1.21% | 80S
• 7/5 Bristol-Myers Squibb (BMY), 5.78% | 70S
• 7/5 JPMorgan Chase (JPM), 2.47% | 70S

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🗣️Quote of the week🗣️

There is no quote this week, but I listened to the latest Dividend Talk podcast on the plane ride home. It was an enjoyable recap of Nike and the host's quarterly portfolio activity.

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⭐Ryne Williams writes a free weekly dividend newsletter and creates multiple top-notch YouTube videos every week.

🤑Rick Stambaugh from Orange Mountain Financial brings you ‘Grow Retirement Income.' He’s a seasoned pro with over 30 years in trading and a passion for guiding folks to a prosperous retirement.

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🎶Random music from the Dapper Dividends jukebox🎶

Genesis - Land of Confusion

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