AWM Insights Financial and Investment News

In this episode of AWM Insights, Justin Dyer and Mena Hanna take you behind the headlines to dissect why great products like Nike don’t always translate to great investments. They break down recent events in the world of apparel stocks, share stories that resonate with athlete families, and dig into the pitfalls of hype-driven investing. Packed with sharp data points, memorable anecdotes, and proven wisdom, this episode challenges conventional thinking and emphasizes the timeless value of patience, discipline, and diversification for building multi-generational wealth. Tune in for practical lessons that will strengthen your family's long-term financial game plan.

Chapters
(00:00) When Great Products Don’t Mean Great Investments
(02:00) Nike’s Wild Ride and Valuation Lessons
(06:00) The Trap of Hype and Headline Chasing
(09:00) The Importance of Patience and Discipline
(11:00) Long-Term Returns and Diversification Wisdom

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Creators and Guests

Host
Justin Dyer
Chief Investment Officer and Chief Operating Officer at AWM Capital
Host
Mena Hanna
Senior Investment Analyst at AWM Capital

What is AWM Insights Financial and Investment News?

A bite sized discussion on timely financial news and investment topics, to help you maximize your net worth and wealth for the next generation with Justin Dyer and Mena Hanna of AWM Capital.

Justin Dyer: It's a great reminder when
we see behavior or activity like Nike.

It's a little microcosm, of
market behavior and how these

things can turn against you.

At the end of the day, there's a great
Warren Buffett quote that I'll pull in

here, that I think speaks to both this
point I just made, but also the point

around Nike, which is, "The stock market
is a device for transferring money

from the impatient to the patient."

It really can be distilled down
to a simple comment like that.

You are rewarded to be patient.

You are rewarded to be disciplined.

You will reach your vision of a
1Hundred Year Family if you can

do those things, quite simply.

Hey, everyone.

Welcome back to another
episode of AWM Insights.

It's your host, Justin Dyer, Chief
Investment Officer here at AWM,

joined as always by Mina Hanna,
our portfolio manager here at AWM.

And we're gonna i-in a way continue
con-- the conversation from last week

around great products not necessarily
leading to great investments, um,

or the companies that make great
products aren't necessarily great

companies to make an investment within.

There's some, uh, current, current day
examples, um, current event examples that

are kind of in line with that and, uh,
we're, we're, we're gonna extend that

conversation to some, some good reminders,
some lessons learned or lessons reaffirmed

around long-term investing, investing
for that one hundred-year family.

How, how do we think about it?

And hopefully leave you all today
with, um, just great reminders around

the idea of, uh, uh, of good products
not necessarily leading to good

outcomes from an investment standpoint.

And also really, you know, embedded in
all of this is, is chasing the hype and

really making sure you understand what's
going on kinda underneath the headlines.

Um, in this day and age,
there's headlines everywhere.

There are, uh,

Mena Hanna: uh,

Justin Dyer: tools and platforms that
constantly want our attention, and

oftentimes, more often than not, you
should not pay attention to those.

Shut, shut down your phone, shut
down to your devices, um, and,

and really look elsewhere for, for
kind of that, that, that advice.

Um, so without further ado,
let's jump right into it.

Uh, Mina, the, the company I'm alluding
to, uh, specifically is, is Nike.

Um, pretty interesting headline
certainly today if someone was gonna

g- was to go type in Nike stock into,
you know, whatever web, web browser

of choice or social media of choice.

You're gonna see a lot
of chatter around that.

Um, you could even extend this to, uh,
apparel or shoe companies at large, right?

There, there's been some
movement in, in those stocks.

So as we always do, let's, let's just
bring everyone up to speed what's

going on with Nike specifically
and, and, um, yeah, what is the--

what, what, what are the details?

Mena Hanna: Yeah.

Apparel in general, as you pointed
out, is selling off, but people are

really focused on Nike specifically.

It's down, what is it now?

Close to 80% in the last five years,
which is pretty outs- like, pretty

crazy number to actually digest.

Um, and this is on the back of a,
a great run-up that it had during,

you know, the COVID times when
everyone, even people here in the

office, were logging in at 7:00 a.m.

and buying Jordans or trying to buy,
you know, rare Jordans during COVID

and, and selling them, and that
whole resale cycle was going on.

That led to the s- company's stock
price essentially doubling during,

uh, those, those two years kind
of leading before and after COVID

And it hit a high of around $180.

Today, it closed at $40.

So it's a pretty crazy, crazy sell-off
that's happened for a couple reasons.

Happened because of the valuation,
how much the company was actually

worth relative to its earnings.

It was essentially trading like
a tech stock, uh, during COVID.

There was just a ton of hype.

People were flocking to the stock.

That's usually a bad sign and, and
we've seen the unwinding of that.

And then on, on the other side of that,
there's also just been a loss of market

share, uh, specifically in China.

You know, it just came out that Nike
now is not the company with the,

with the most market share in China.

There's actually two companies now
potentially that might be ahead of them.

Those are going to be things that just
hit the income of the business, and if you

have sort of the multiple, the valuation
going down, the income going down at the

same time, you can see wild swings in
the wrong direction, which is exactly

what we've seen over the last five years.

Justin Dyer: years.

Yeah.

I wanna, I wanna drill into the
comment you made around, you know,

let's call it the macro losing market
share, which is, which is happening.

But if, uh, tying this into my comment
around, you know, believe in the

hype or, or actually the headlines
rather, um, nowadays all headlines

seem to be hype-driven headlines.

Yeah.

But, uh, right, there's just, there's
nuance to this story in particular where,

yes, I, uh, there's new entrants into,
uh, new entrants into the, the sector.

China and the US are going
through a geopolitical tug of war.

Well, yeah, it's only natural for any
US-based company, Nike in particular,

to probably lose market share to that.

But I think the, the devil in the details
here is exactly what you, you hit on is

it, it was overvalued to begin with on
a relative basis to its, its earnings.

The amount of money that was
actually hitting the bottom line,

it was trading like a tech stock.

Yeah.

And we've seen a lot of examples
of companies trading being priced

at just ridiculous valuations.

That has been a very common market
practice, let's call it since COVID,

where, you know, you've-- I think
you coined the term or s- or, or took

it from someone, financial physics.

The financial physics of that type
of behavior just doesn't make sense.

Nike trading at seventy times
its earnings is, is just, is,

it, it bad behavior, right?

It's like it, it, the…

It just is illogical really, I
guess, calling a spade a spade.

Um, and so now it's actually priced
how it always has been priced.

Yes, it-its earnings have come down
a little bit, but from a market

health or a, a health of the, the s-
the, the behavior of the stock, it

actually looks like it's normal and,
and where it, it, where it should be.

And so all of this hype and kind
of, uh, saber-rattling or, "Oh my

God, what is happening to Nike?"

And throwing even like some
political stuff out there, it just,

it misses, I think, just the, the
basics of the, of the story here.

And I-- we highlight this because
I wanna highlight this, kind of

what I, what I was alluding to.

This behavior is a lot more prevalent
over the last five to six years.

And so let's, let's talk about that a
little bit, Mina, where, um- You know,

what the-- what, what's the downside here?

Like, what are, what are
we effectively doing?

It's kinda like playing, uh,
hot potato in a way, right?

Mena Hanna: It's playing hot potato, but
usually when people hop into the game,

it's at that kind of peak stock price.

Like, people are not getting into
Nike in 2019 before this craze

starts where, you know, the, the
stock price is around 60 bucks.

People are getting in at 160 bucks when
they've used the Sneakers app, and this

goes back to our conversation last week.

They've used a product.

They probably got a pair of Jordans
that they like, and that then influences

a trade, a financial decision, which
is a poor one and, and one that's

made out of emotion, um, and not one
that's made kind of out of, you know,

like you said, financial physics.

I also think, like, the interesting
story with Nike, and this is something

that I think is relevant to a lot
of our, a lot of our athlete clients

and potentially some of them that are
sponsored by, by the business, the

Magic Johnson story is, is a big one.

You know, people often quote if he had
taken-- if he took that offer, he'd

be worth $20 billion, $25 billion.

That's kind of what the stock price
would've peaked at in 2021 when all of

these metrics are, are pulled today.

That kind of deal would've
been worth $5 billion.

Justin Dyer: dollars.

Mena Hanna: But still, like, there is,
there is an enormous amount that you

could potentially gain concentrating,
taking stock as equity, doing that.

But there's also an enormous amount that
you could potentially lose, as I'm sure a

lot of people that traded Nike in, in 2021
know, uh, if you, if you actually held.

I'm guessing a lot of people just took,
took losses at some point throughout

the years and aren't down 80%.

But, but yeah, if you time these
things wrong, it's happened to Bitcoin.

I know there's been a little, little
resurgence in Bitcoin recently.

If you buy at the top, the outcome
is, is potentially disastrous.

Justin Dyer: Yeah, I, I
think that's a great place to

turn towards some reminders.

We're, we're, uh, we're having
this conversation today not

to say, "Oh, there's a lot of
this bad behavior going on."

That is true.

There's, there-- The market is, in certain
areas, trading at very rich prices.

But it's not to say you should not
systematically invest along the journey

and to support your hundred-year family.

We know, to your point, you can really
get hurt trying to play these individual

names or playing the hype cycle.

Uh, we highly, highly, highly,
highly advocate against doing that

and trying to buy individual stocks.

It's a version of what we're
talking about here today.

Um, and so it's just a great reminder.

Let's go back to the
tried and true, right?

We don't know how to predict markets.

No one truly does in a
systematic, repeatable way.

So continue to stay disciplined,
continue to keep-- stay exposed to

the US, to equity markets at large.

We're, we're global investors.

Um, but don't partake in this, in
this bad behavior, this hype chasing

cycle because it can move quickly.

It can be incredibly damaging to your
likelihood of accomplishing that one

to one hundred year family journey.

We know those things.

It's a great reminder when we see
behavior or activity like Nike.

It's a little microcosm, um, of, of,
of market behavior and how these things

can turn really, um, really against you.

And at the end of the day, I mean,
th-there's there's a great Warren

Buffett quote that I, that I'll, I'll
pull in here, uh, that I think speaks

to, to both this point I just made, but
also kind of the, the, the point around

Nike, which the-- is, "The stock market
is a device for transferring money

from the impatient to the patient."

It, it, it It really can be
kinda distilled down to a

simple comment like that.

You are rewarded to be patient.

You are rewarded to be disciplined.

You will reach your vision of a
1Hundred Year family if you can

do those things, quite simply.

Mena Hanna: Even Nike stock, like
I'll, I'll take this all the way back.

Nike stock, if you only looked
at it in 10-year blocks, has

actually done phenomenally well.

It's up 42,000% since 1983,
which is, which is great.

I will, I will take that over,
you know, that time period.

Um, people … No one talks about
this, but Nike stock in the first

two years was down 50% after IPO.

You know, we talk about negative
performance all the time.

Nike's actually a perfect example.

1985 it was down 50%.

There's some market reasons for that,
but that is, that is a data point.

After that, it was a turbulent ride.

If you looked, there are a lot
of, call it, peaks and, and

crevices and rallies and sell-offs.

If you actually look at the
long term, it looks great.

The patient capital, as you
said, performed fantastically.

The people that got in during the
boom cycles and potentially sold

out during the bust cycles, they
did not capture that 42,000% return.

So it is exactly what
you, what you just stated.

You wanna be the patient capital.

You wanna think about this game
in, in decades and centuries.

And that sell-off, that 80% wipe out, uh,
that we just saw, for the patient investor

definitely impacts returns a little bit.

But if you're properly diversified,
if you've been holding this for the

long haul, you're, you're up pretty,

Justin Dyer: pretty good.

Yeah.

And I'll, I'll add even just a little
bit more color 'cause we're talking

about hype and headline numbers.

So, like, that sounds like an incredible
number, forty-two thousand percent.

Well, if you annualize that and compare
it to the S&P 500, it actually did

outperform the S&P 500- Yeah … but
just by about a percentage point.

So it goes to show we can be really
captivated by these headline numbers.

You know, Lakers just selling for
twelve and a half billion dollars or

whatever that n-number was, twelve,
twelve-point something billion dollars.

You look back at how that, that
compounding growth actually happened.

It's about what the
public equity market did.

And, uh, I say that because, well, one,
it's good to always remember, like,

what, what, what did you actually earn?

The headlines are one thing,
but the actual growth rate

is what's most important.

Um- But I think the important piece
of it is on a relative basis, you had

one company, Nike in your example,
which has a substantial amount of risk.

I mean, Nike could have
easily gone to zero, right?

There's a number of examples of all that
happening in the market versus the S&P

500, which, um, was well diversified.

You're never gonna lose
your money by investing…

I shouldn't say never gonna lose.

I think that's a, that's a compliance,
uh, uh, um, uh, strike, I guess.

But you're never gonna lo- you know,
lose money like the one free lunch being

heavily diversified, all that good stuff,
and you're earning something that was very

comparable with substantially less risk.

So that, that's a great reminder as well.

So I, I think it's a great place to end.

There's a lot of little lessons earned
within this conversation, like I just

said, around, um, digging into the
headlines, Nike returning forty-two

thousand percent over its life, which
is, uh, what is it, forty-nine-ish

years or forty-eight and change
years since it's, it's been public.

But you convert that to
an annual basis, it's a…

it's very close to what the S&P 500 did,
although you have a lot of single company

risk and, um, and you could really,
really, really protect yourself by being

diversified, uh, like in the S&P 500 or,
you know, how we subscribe to investing

much more diversified even than that.

Um, and just great reminders
around being patient.

The, the, the re- the, the, the
way equity markets reward patience,

discipline, and sticking to your
plan is absolutely exceptional.

Yes, it doesn't sound as exciting
as, uh, as, as, as all the chatter

and headlines and whatnot want us to
necessarily believe, but it certainly is

a tried and true method that we know that
works and has a level of predictability

and really will support the, uh, the
evolution of your hundred-year family.

So hopefully, um, hopefully this
conversation wa- was helpful

and you kind of learned a new,
slightly new perspective today.

Um, please shoot us your
questions and topics you want

Mena Hanna: to discuss.

Six two six-eight six
two-zero three five five.

Justin Dyer: Awesome.

And until next time, own your wealth,
make an impact, and always be a pro