Buy The Nike Dip

When a company goes through a tough patch there's an important question to ask: is the issue internal, or is it a result of general business conditions? Nike's current supply challenges are a good example. After Nike released results last week the share price dropped by 6% because they were experiencing production and distribution problems that will affect future profits.

Factories in Asia have shut due to Covid lockdowns, there are shipping disruptions and there's a lack of labour in the developed world. These are mostly external factors that are out of Nike's control. They are challenging, but they are very fixable.

If a company has internal, cultural problems then we need to worry more. For example, Wells Fargo started to receive fines because their employees were scamming clients, which pointed towards a rotten culture. We got out of that one just in time.

We pay very close attention to the news flow from the companies that you own. That's our job and fortunately we enjoy it very much. Of course, we don't get it right all the time, or react swiftly enough, but we try very hard.

As for Nike, I feel confident that we should buy the dip. The company is a well-oiled machine, and it will overcome these short-term challenges.