We've all pined for "the one that got away"...
If you've been investing for any length of time, you know what we're talking about.
It's a business you admire... a product you love... a brand you see everywhere. But one glance at the stock chart tells you the big opportunity is long gone. The time to buy was five or 10 years ago, not today. If only you could turn back the clock...
Consider Nike (NKE), for instance.
In 2000, the footwear and apparel juggernaut stood alone at the top of its industry. It had generated $9 billion in sales and $500 million in profits over the previous year... easily besting its chief rivals, Adidas and Reebok.
But Nike's financial success hadn't led to a higher share price... You see, back then, investors loved "sexy" dot-com stocks. They weren't interested in a "boring" sportswear business.
By March 10, 2000, Nike's stock was down nearly 65% from its high in February 1997. It closed at a split-adjusted $3.36 per share that day... the same day the tech-heavy Nasdaq Composite Index peaked after soaring nearly 300% in the previous three years.
Then, the dot-com bubble burst. The Nasdaq plummeted more than 80% over the next three years. Many beloved technology companies went out of business.
Meanwhile, Nike shares took off... The stock more than doubled by the end of 2001. And it hasn't looked back, as shares are up roughly 20-fold since.
Today, Nike remains the largest sportswear company on the planet. It has a huge worldwide reach and produces almost $40 billion per year in sales across four continents. Nike has one of the most recognized brands in the world. Forbes ranks Nike at No. 18 on the list of most valuable brands globally – worth $32 billion. Nike's market cap now exceeds $120 billion. Investors love the stock today.
In hindsight, Nike shares at the turn of the century were a tremendous investment... It was a fantastic opportunity to buy a prolific brand that had gone on sale.
We share the Nike example because, with the stock market near all-time highs today, we see a similar situation developing... with one of the sportswear giant's main competitors.
Under Armour (NYSE: UA) has experienced explosive growth since Kevin Plank founded the company roughly two decades ago. Plank has developed an incredible American brand... And he has plans to expand it globally. Since the company went public in November 2005, it has grown sales more than 17-fold. And its potential is huge.
But at the end of 2016, Under Armour hit a speed bump. Its quarterly sales growth slowed to single digits – down from more than 20%. The stock plunged as its value fell in half from just five months earlier.
Things got worse in 2017...
Wall Street's love affair with the stock was officially over. In roughly two years, the stock plunged almost 80%, erasing nearly $18 billion of market cap.
But investors are missing the bigger picture. No company can grow at 20%-plus rates forever. Eventually, every business grows to a size where growth slows. But slow growth doesn't mean no growth. Investors are pricing the stock as if the company is in terminal decline.
They're wrong. Under Armour built a world-class brand. We expect that our grandchildren's grandchildren will still wear Under Armour clothing.
We've seen investors give up on companies whose growth has slowed many times before. They're missing that Under Armour doesn't need to grow at 20% rates again for them to make a ton of money with this investment.
Look no further than Nike. If Under Armour follows Nike's playbook, investors will be rewarded handsomely.
Under Armour has a plan. It knows its high-growth days are over. Plank is pivoting the company in a new direction. The company is transforming itself from a high-growth business to a high-profit company. Until now, revenue growth was all that mattered. Now, it's focused on profits.
Under Armour said 2018 will look a lot like 2017. Don't expect to see any significant improvement until 2019.
That's OK. This is a long-term investment. And if we wait until after the improvement is clear to the rest of the world, the stock price will already reflect the turnaround.
The trend is already changing direction. At the end of October, the company reported revenues and gross margins that beat Wall Street's estimates. It also raised guidance for the rest of the year. Finally, the market is starting to see what we see.
Under Armour shares have almost doubled in less than a year.
The stock is still down more than 50% from its 2015 highs. But a bottom is in. And the upward trend is gaining momentum. A return to its glory days of 2015 would mean almost a triple from here. That's our initial target. Longer term, our bet is investors could more than double those gains over the next 10 years.
Under Armour is shifting to become a stable, global competitor that will rival sportswear stalwarts Nike and Adidas for decades. Years from now, investors will look back and realize that right now was a key turning point in the company's history.
Sometimes investing is simple.
Editor's note: Stansberry's Investment Advisory recommended the stock in May 2018. Readers who followed that advice are up more than 30% so far.