Under Armour Inc (UA), NIKE, Inc. (NKE): A Growth Company Unfazed By Macro Trends

Many investors tend to buy a stock after a big run because they’re upset they missed it, and they hope that run will continue. While this strategy actually works sometimes, it’s certainly not a guarantee for Lululemon Athletica inc. (NASDAQ:LULU). Actually, it would be a big risk.

Unlike Under Armour and NIKE, Inc. (NYSE:NKE), Lululemon has been the center of attention for all the wrong reasons. These reasons include a $67 million recall of Luon yoga pants, the announcement that CEO Christine Day will be leaving, and posting a fake CEO ad on its website and Facebook page. While Lululemon Athletica inc. (NASDAQ:LULU) focuses on building personal relationships with its customers, which is a big positive for potential future sales, this company’s culture seems to be too outlandish for an investor to feel comfortable.

Conclusion

Under Armour Inc (NYSE:UA) is a very well-run company with a brand that’s consistently gaining exposure. I have been bullish on Under Armour since 2005, but I recently wrote an article stating that my only concern was valuation. Currently, Under Armour trades at 59 times earnings, which still makes me a little uneasy. In a normal economic environment the company’s growth would more than justify this multiple, but considering the current economic environment, there is at least a little trepidation.

On the other hand, if you’re looking for a long-term investment in a quality company with strong growth potential, then you’re not going to find many better options. In order to protect your capital, consider scaling your way into a position, saving the majority of your capital to purchase more shares if the stock suffers. If you want a little less growth potential but more safety, then Nike is likely a better option for you.

The article A Growth Company Unfazed By Macro Trends originally appeared on Fool.com and is written by Dan Moskowitz.

Dan Moskowitz has no position in any stocks mentioned. The Motley Fool recommends Lululemon Athletica, Nike, and Under Armour. The Motley Fool owns shares of Nike and Under Armour.

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