When it comes to investing, investors are often their own worst enemy. A falling market may lead to fear, and cause someone to sell when it’s a great time to buy. Likewise, a one-time earnings report may not mean much in the long haul, but it could create a buying opportunity.
That’s particularly true with regards to companies that have strong brands. That’s because the long-term power of owning a great brand pays out over time.
Investors didn’t like the mixed earnings report from Nike (NKE) last week. But the company’s mixed message overlooks its international growth. Specifically, they beat revenue estimates for the Chinese market.
Nike’s global reach has been growing in recent years, and that may mean last week’s lackluster performance makes for a buying opportunity now.
Action to take: Nike shares are down nearly 20 percent from their 52-week highs. And at 28 times forward earnings, they’re on the lower end of their valuation over the past two years.
That makes shares worth buying at current prices or on any further drop. Plus, shares yield 1.2 percent right now, with a history of dividend growth.
For traders, the September $120 calls, last going for about $1.25, could see high double-digit returns on a rebound in shares over the summer following last week’s earnings drop.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.