About: Adidas AG is a German multinational corporation, founded and headquartered in Herzogenaurach, Bavaria, that designs and manufactures shoes, clothing and accessories. It is the largest sportswear manufacturer in Europe, and the second largest in the world, after Nike.

Chris Napier, Momentum Securities Portfolio Manager for the Kwa Zulu Natal region, shares his insights.

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Transcription:

Good day, my stock pick this week is in the Momentum Securities international economic portfolio, this company was founded by Adolf Deslar way back in 1949. Its origins pre-date Second World War.

This company still holds the second biggest market share in the global sports apparel, accessories in footwear segments, and that company is Adidas.

Now Adidas has significantly outperformed the decks of the last few years and it tries to continue to do so in to the future. It’s currently viewed as a cheap compared to its competitors and currently trades in a P E way below its five-year average.

Now it showed resilient sales during COVID lockdowns in 2020 and recent research has shown improvements in the brand's overall performance. Now close on to 50% revenue being generated in the US and China alone, it actually bodes well that Adidas are comfort of growth in China in 2022, but the kick is yet to come.

The share price is currently trading at around about 230 euros per share of on the sides of 336 euros and that's around about a 30% difference but it got pretty close to the bottom of its 52-week trading range but here is where the kick comes in.

We are on a football world cup year and as Qatar 2022 happens later this year. World cups have always offered boosts to earnings for Adidas. We have seen the share price end each world cup year higher than where it began. Just look back at 2018, 2014, 2010 or even back to 2006. 

Another potential boost to this dynamic is the fact Adidas are the kits suppliers for some of the top rated teams heading into this world cup. This includes the likes of Germany, Argentina, Spain and even Belgium. This should further assist apparel sales in both the third and fourth quarters of this year.

On a P E of around about 21 and a dividend of 1.3% in euros, I would only be mindful of the level of 220 euros downside but view Adidas as a good addition to any investor's portfolio.

Until next time, goodbye for now.