3 Stocks I'm Buying in November: Nike, Paycom, and Southwest Airlines blog post

1. Nike (NKE): A Timeless Leader in Athletic Brands

Nike has seen its share price tumble to $75, a stark contrast to its all-time high of $179 back in November 2021. This sharp decline has critics speculating that Nike's reign is over. But is it? Let’s look deeper.

Key Metrics and Strengths

• Revenue: Down slightly year-over-year ($50B vs. $51.4B), but still robust.
• Gross Margin: A healthy 45%, meaning $45 of every $100 in sales is profit before overhead—a figure that's climbing.
• Free Cash Flow: Over the last 12 months, Nike generated $7.2B in free cash flow, significantly above its 5-year average of $4.7B.

Nike’s move toward direct-to-consumer sales is key here. Cutting out middlemen boosts margins, which could lead to even stronger profitability over time. Combine this with their incredible 43.7% market share and unparalleled brand value (ahead of Louis Vuitton and Gucci), and it’s clear Nike isn’t going anywhere.

Stock Analyzer Tool Insights

Using conservative assumptions:

• Revenue Growth: 3%, 5%, and 7%.
• Profit Margin: 10%, 11%, and 12%.
• P/E Ratios: 20, 23, and 26 (reflecting its premium status).
• Target Prices:

• • Low: $60
  • Middle: $85
  • High: $120

At $75, Nike sits well within the range for solid returns. If my middle assumptions hold, investors could expect a 10.5% annual return, including dividends.

2. Paycom Software (PAYC): A Growing SaaS Powerhouse

Paycom’s journey has been volatile, with its stock swinging from a high of $560 in 2021 to a 52-week low of $139.50. The company recently surged 23% after crushing earnings, but even at higher prices, its growth potential is worth examining.

What Makes Paycom Special?

• Client Base: 36,820 customers, with no single client representing more than 0.5% of revenue—diversification at its finest.
• Retention Rate: An impressive 90%.
• Revenue Growth: Double-digit growth projected for the next several years, with analysts forecasting 11–14% annually.
• Gross Margin: A stellar 83%, nearly double that of Nike.

Stock Analyzer Tool Insights

• Revenue Growth: 6%, 8%, and 10%.
• Profit Margin: 20%, 23%, and 26%.
• P/E Ratios: 17, 20, and 23.
• Target Prices:

• • Low: $115–130
  • Middle: $175–200
  • High: $260–280

While the current price may make it harder to achieve stellar returns, Paycom’s high-margin business and limited debt make it a compelling long-term prospect—especially during a broader market dip.

3. Southwest Airlines (LUV): The Best-Run Airline in the Industry

Southwest Airlines shines in the often-turbulent airline industry. It’s operationally efficient and customer-focused, ranking second in customer satisfaction in 2024 (just behind Alaska Airlines).

Key Metrics

• Fleet: 817 planes, compared to Delta’s 1,273.
• Market Share: Tied for second in total domestic passenger miles (17.2%).
• Hedging Strategy: Consistently hedges fuel costs, managing its largest expense more effectively than peers.

Pre-COVID, Southwest maintained profit margins of 10–15%, a consistency that suggests its recent struggles are temporary.

Stock Analyzer Tool Insights

• Revenue Growth: 2%, 4%, and 6%.
• Profit Margin: 6%, 8%, and 10%.
• P/E Ratios: 15, 17.5, and 20.
• Target Prices:

• • Low: $39
  • Middle: $82
  • High: $145

At its current price of $31, Southwest offers tremendous upside for investors who believe in its operational strength and ability to rebound.

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