What happens if the Golden State Warriors lose?
In a moment of intense pain and anguish over trying to figure out the valuations of Nike (NKE), Trifecta Stocks portfolio holding Foot Locker (FL) and Growth Seeker portfolio name Under Armour (UA), I found myself wondering: what would happen to these stocks if Steph Curry, the putative greatest player ever and the man who wears the hottest basketball sneaker out there, the Under Armour shoe, didn't make it to the finals? What happens if Kevin Durant, Russell Westbrook and the Oklahoma City Thunder actually beat Golden State and Curry just goes home a loser? Would Under Armour's stock get hammered?
Then I said to myself, wait a second, if the valuation of a company's stock is determined by whether a team wins or loses in the NBA Western finals, count me out. There's just way too many variables.
And that's how I feel right now about the footwear and sports apparel group. I have never seen it in this state of flux, and while opportunities may abound -- and I like Under Armour, Nike and Foot Locker -- this group has just become too hard to reconcile.
Think about it. Nike reported a quarter with guidance that no one really liked and its stock has been headed down ever since. Under Armour reported a similar quarter, with lots of worries about excess inventories, something that makes sense given that The Sports Authority just shut down. Foot Locker reported a quarter that it may have liked, but it is the only one who did.
In fact, when I went through the conference call there was an Alice in Wonderland feel to it, to some degree just psychedelic in how well the company thinks it is doing vs. the reality, at least for now. I found myself thinking, maybe I am nuts about how bad this number is vs. what I was looking for, and I should go ask Alice, when she is 10 feet tall, whether she would buy Jordans or Kobe's or Currys or, worse, something from Adidas (ADDYY), which is suddenly making a comeback. We had presumed that company dead and buried, but now it's back.
To make matters worse, the shorts are climbing all over this group. Yesterday, with so many people wondering why the stock of Under Armour was so weak, I just decided to go to TJ Maxx (TJX) and take pictures of all of the remaindered UA socks they had. That was easy enough. But the problem is that there have always been remaindered UA socks on those racks; it just didn't matter when the stock was going higher.
So what's really going on here? I think that the whole group has become "show-me," meaning that we need clean quarters from all of the players and more important, the bar has been raised, not lowered by all of this chatter. As Matthew Boss from JP Morgan put it best, writing about Foot Locker: "three pointers and lay-ups now required," if the second half is going to produce upside.
Sometimes, we just have to admit that short term we have a battleground. Maybe Nike's sales are weaker at Foot Locker because Nike's having so much success in the direct-to-consumer channel. Maybe it doesn't matter if Curry wins, because Under Armour is successfully transitioning to a health and wellness company. Maybe Foot Locker isn't being "mauled" by the mall and just has some difficulty with its Nike inventory.
Whatever. If you don't take a long-term view on these companies, you are going to drive yourself crazy. They can't be judged short term, as there are too many variables, too many smart people on all sides and too many shareholders itching to run.
Best to buy the shoes, wear 'em, stay in shape, and wait until the three pointers begin.
