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Number Cruncher

Stock screens for investment ideas from professional investors. Exclusive to subscribers of Globe Unlimited.

Number Cruncher

Sweat equities: Sizing up the major players Add to ...

What we’re looking for

As we ease back into football and hockey season, in many cases paying handsomely to support our families’ sporting habits, we thought it might be a good time to look at companies that make money off sporting goods and apparel.

What we found

Under Armour Inc. and Nike Corp. are among analysts’ top picks in the sector. Nike has 15 “buy” ratings, eight “hold” and zero “sell” ratings, while Under Armour has nine “buys,” 15 “holds” and one “sell,” according to Bloomberg data.

Under Armour’s sales are likely to grow more than 22 per cent through 2013, says Canaccord Genuity analyst Camilo Lyon. He likes its expanding brand presence and highly profitable retail outlets as well as the company’s decision to produce cotton apparel. He has a $75 (U.S.) price target on the stock, which he rates “buy.”

Nike, on the other hand, is facing pressure on its profit margins because of rising input costs and problems within its supply chain, Mr. Lyon says.

“Demand continues to be robust and we expect the pipeline of product to maintain the top-line momentum,” he says.

“With 32 per cent of the Nike brand exposed to developing markets, we believe any potential deceleration in developed markets could be muted by the developing markets growing at a faster rate.”

He has a “hold” rating on the stock and a $96 price target. The consensus target price of 19 analysts surveyed by Bloomberg is $98.74.

For healthy profit margins, Mr. Lyon recommends looking at Foot Locker Inc.

“With improving fundamentals that are anchored by a new, disciplined approach to driving profitable sales growth, coupled with recent share price weakness, we view [Foot Locker’s]risk/reward profile as attractive and rate the shares ‘buy,’ ” he says.

“We believe the current product cycle trends in running and basketball are accelerating our margin-recovery thesis, and given continued innovation from the brands, we see no signs of the trends decelerating.” He has a $28 price target on the stock, which has nine “buy” ratings, six “holds” and zero “sells,” according to Bloomberg data.

Mr. Lyon has mixed feelings on Columbia Sportswear, which is rated “buy” by four analysts, “hold’ by 11, and carries no “sell” ratings, according to Bloomberg data.

“We view [Columbia Sportswear]as a company in the midst of a brand repositioning, and while the company has had recent success with particular brands and innovative technologies it is bringing to market, concerns regarding excess inventory and a planned [business software]implementation raise the execution risk quotient,” he says.

He rates the stock “hold” and has a $57 price target.


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