5 Best Fashion Stocks To Buy Now

1. NIKE, Inc. (NYSE:NKE)

Number of Hedge Fund Shareholders: 70

Topping the list best fashion stocks to buy now is NIKE, Inc. (NYSE:NKE), ownership of which is flat over the last year among hedge funds even as shares have tumbled from their all-time highs. Terry Smith’s Fundsmith LLP and Ken Fisher’s Fisher Asset Management remain the two largest shareholders of NKE among the funds tracked by our database, as they were a year ago.

NIKE, Inc. (NYSE:NKE) doesn’t have anywhere near the sales growth or operational efficiency that Lululemon currently does, but there’s a lot to like about the stock nonetheless. For one, it has a decent and growing dividend that yields 1.26%. Given Nike’s low payout ratio and expected future earnings growth, there should be nothing stopping the dividend from continuing to grow annually for the foreseeable future. And while Nike’s sales grew by just 4% in Q3, they were up 10% on a constant currency basis, which is rather impressive.

The RiverPark Funds’ Large Growth Fund believes NIKE, Inc. (NYSE:NKE) will continue to exhibit strong top-line growth into the future, as it discussed in its Q3 2022 investor letter:

“Nike: NKE shares were a top detractor this quarter on higher inventory balances leading to lower-than-expected gross margins for the next couple of quarters. The company reported 1Q23 sales and EPS beats, but freight costs, markdowns, and the strong dollar weighed on gross margins. Nike continues to expect low double-digit currency-neutral sales growth, but the strong dollar will reduce overall sales growth and discounted inventory will further reduce gross margins for the year.

Nike is, by far, the leading athletic footwear, apparel, and equipment company in the world with over $46 billion in revenue, $6 billion in 2021 annual free cash flow, and over $4 billion of excess cash. After working through its near-term currency and gross margin issues, we expect the company to return towards management’s guidance of at least 10% annual revenue growth, and return to its accelerating profit growth, as longer-term we expect margins to be materially aided by rising average sales prices (from both increased pricing and a mix shift to more premium products), the company’s deep innovation pipeline, a secular shift from the company’s traditional wholesale channels to a more direct-to-consumer approach (now 35% of revenues up from 16% ten years ago), and a more streamlined supply chain. We believe that the continued global secular growth trend towards active wear will continue to aid Nike’s top-line growth, while we expect the combined gross and operating margin improvements from its initiatives will drive long-term mid-teens or higher annual EPS growth for the foreseeable future.”

For more of the latest stock picks worth considering for your portfolio, check out the 13 Best Bear Market Stocks To Buy and the Marc Cuban Stock Portfolio.

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