American Consequences - February 2019

‘I think we found the next Michael Jordan’

In Nike, the Guru saw a formula for success that he thought could be repeated: Identify an iconic brand with leadership that “gets it,” invest early, and then – so long as the story doesn’t change – hold on as the stock powers higher and higher... Then rinse and repeat with the next great brand. So the Guru set out to find the world’s promising, future best brands. He spoke with CEOs and investors he admired, pored through financial data and reports, and interviewed scores of young people... research that led the Guru to athletic brand Fila. And in Fila, he saw an opportunity for history to repeat itself almost verbatim . In fact, when the Guru decided to invest in Fila, he told his team, “I think we found the next Michael Jordan.” At the time, Fila was a small, fast-growing athletic brand from Italy. In the late ‘80s and early ‘90s, its products began to catch on with popular rap and hip-hop artists and as they went mainstream, so did Fila. By 1993, the company was public. But Fila wanted more. It wanted to use its urban “street cred” to break into the suburban markets the way Nike and Reebok had done. So in 1994, the company made its boldest move yet: It outbid Nike and signed an endorsement deal with up-and-coming basketball superstar Grant Hill. Of course, with the benefit of perfect hindsight, we now know that Hill was no Jordan – either on or off the court. But in 1994, many thought Hill could be bigger than Jordan... And he was

When the story changes, you sell... I learned this lesson from a talented teacher. A man with vast investment knowledge. Because he’s an intensely private person and would prefer to remain nameless, I’ll simply refer to him as the “Guru.” The Guru is an investing wizard and billionaire. He’s equally adept at making money during both bull and bear markets, as well as nailing investing from a top- down, macro perspective and a bottom-up, fundamental one. Over the years, the Guru has made an absolute fortune investing in Nike. Early in the company’s history, most folks saw it as a textile company that sold sneakers... But not the Guru. He recognized Nike’s potential for success: The company wasn’t simply selling shoes... It was selling aspirations – a chance to be the best. It was building a brand that honored great athletics. Most important, its brand was championed by the greatest of athletes. Nike knew that to be the “Michael Jordan of brands,” it needed Jordan to endorse its products. The Guru first invested in Nike in 1984, for less than $0.20 a share (split-adjusted). Today, shares trade for more than $80. As of last year, the Guru still owned Nike shares, meaning he’s sitting on a total return of at least 40,000% from his initial purchase. But that was just the beginning...

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February 2019

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