In this article, we discuss the 5 best sporting goods stocks to invest in. If you want to see more stocks in this selection and get insight into the market, click 10 Best Sporting Goods Stocks To Invest In.
05. Foot Locker, Inc. (NYSE:FL)
Number of Hedge Fund Holders as of Q2, 2022: 28
Foot Locker, Inc. (NYSE:FL) is a leading athletic apparel and premium footwear retailer. Foot Locker, Inc. (NYSE:FL) trades at bargain levels and offers an attractive dividend yield. As of October 24, the stock has a trailing twelve-month PE ratio of 5.04 and is offering a forward dividend yield of 5.04%. Foot Locker, Inc. (NYSE:FL) is one of the best sporting goods stocks to invest in right now.
Wall Street analysts see material upside to Foot Locker, Inc. (NYSE:FL). This August, UBS analyst Jay Sole raised his price target on Foot Locker, Inc. (NYSE:FL) to $39 from $29 and reiterated a Neutral rating on the shares. On August 23, Credit Suisse analyst Michael Binetti raised his price target on Foot Locker, Inc. (NYSE:FL) to $40 from $31 and kept a Neutral rating on the shares.
Hedge funds seem bullish on the stock. At the close of the second quarter of 2022, 28 hedge funds held stakes in Foot Locker, Inc. (NYSE:FL). The total value of these stakes amounted to $228.99 million. This is compared to 21 hedge funds in the preceding quarter with stakes worth $177.09 million. As of June 30, Balyasny Asset Management is the top shareholder in Foot Locker, Inc. (NYSE:FL) and has stakes worth $55.96 million in the company. Ken Griffin, Cliff Asness, and Israel Englander were some of the company’s major stakeholders in Q2.
Here is what Miller Value Partners had to say about Foot Locker, Inc. (NYSE:FL) in its first-quarter 2022 investor letter:
“Finally, Foot Locker (NYSE:FL) came under significant pressure during the quarter, with the stock down more than 50% from its highs and valuation not far from early 2020 lows. Nike continues to place a greater focus on their Direct-to-Consumer business, which will decrease their contribution to Foot Locker’s total sales, retreating to historical averages of 50% by 2023. While a near-term headwind to sales, management plans to offset the lost business by expanding distribution to other leading brands, rolling out larger neighborhood free-standing stores, and expanding two new growth banners (WSS & Atmos). WSS stores will provide an off-mall presence and focus on the rapidly growing and underserved Hispanic market. Atmos will provide Foot Locker with the ability to expand into Japan and Asia sneaker market with their digitally led business model. These new growth concepts have a combined potential to add more than $1B in sales by 2024. The company’s balance sheet remains very strong with $800M in cash and management is increasing returns to shareholders through raising the dividend by 40% and announcing a $1.2B share buyback (more than 40% of the float at current share prices). With the next 12 to 18 months as a transition period for the company, the share price weakness provides attractive reward/risk investment potential, near 3x Enterprise Value/Earnings Before Income, Taxes, Depreciation, and Amortization (EV/EBITDA) and close to a 30% normalized free cash flow yield.”
04. DICK’S Sporting Goods, Inc. (NYSE:DKS)
Number of Hedge Fund Holders as of Q2, 2022: 28
DICK’S Sporting Goods, Inc. (NYSE:DKS) operates primarily as a sporting goods retailer in the eastern United States. It is one of the best sporting goods stocks to invest in. On October 20, Oppenheimer analyst Brian Nagel upgraded DICK’S Sporting Goods, Inc. (NYSE:DKS) to Outperform from Perform with a $138 price target.
DICK’S Sporting Goods, Inc. (NYSE:DKS)’s average cash flow yield has stood around 14% for the past two years, and from its fiscal year 2021 to 2022, the firm has grown its earnings per share by a massive 159%. It also pays a $0.49 per share quarterly dividend for a 1.77% yield. Among the hedge funds being tracked by Insider Monkey, Washington-based firm Lone Pine Capital is a leading shareholder in DICK’S Sporting Goods, Inc. (NYSE:DKS), with 5 million shares worth more than $338 million.
In its Q1 2022 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and DICK’S Sporting Goods, Inc. (NYSE:DKS) was one of them. Here is what the fund said:
“DICK’S Sporting Goods, Inc. (NYSE:DKS) was the first stock Michael recommended to us shortly after he joined Baron Capital in 2003. Dick’s share price has since increased about nine-fold. Unfortunately, we sold our investment in Dick’s about six years ago and, although it was a successful investment, we did not realize the full benefit of Michael’s recommendation. We sold too soon because I was concerned that competition from internet retailers would have a permanent negative impact on Dick’s stores’ profitability. I was wrong. Dick’s stock price so far has about doubled after we sold…and its prospects have brightened!
We sold even though we considered Ed Stack, Dick’s Chairman and CEO, a terrific retailer, a great entrepreneur and a special person. Ed had built Dick’s from three bait and tackle stores his dad started into a uniquely positioned, nationwide chain of 730 sporting goods stores. In fact, Dick’s is now the largest nationwide sporting goods chain. Ed had purchased the three bait and tackle stores, the foundation of Dick’s business, from his dad. Ed’s mother loaned him the money to buy his dad’s stores! I’m not exactly sure what that signifies. But it may have something to do with Carl Icahn’s proclamation that “everything I have is for sale except my children…and maybe my wife (…read more)
03. Under Armour, Inc. (NYSE:UA)
Number of Hedge Fund Holders as of Q2, 2022: 38
Under Armour, Inc. (NYSE:UA) is a Baltimore, Maryland-based manufacturer and seller of sports apparel, athletic shirts, and other products. The company has some of the most well-known celebrities as endorsers. For instance, NBA superstar Steph Curry joined Under Armour, Inc. (NYSE:UA) in 2013 and is close to signing a lifetime extension deal of around $1 billion with the entity.
Under Armour, Inc. (NYSE:UA) anticipates its annual topline growth to be around 6% during FY23. The company has undergone restructuring to improve its sales and gross profit margins. Experts believe the stock is very cheap, with a forward EV/Sales multiple below 0.6. On October 20, Williams Trading analyst Sam Poser upgraded Under Armour, Inc. (NYSE:UA) to Hold from Sell with a $6.50 price target.
According to Insider Monkey’s Q2 data, Under Armour, Inc. (NYSE:UA) was found in the public stock portfolios of 38 hedge funds, with collective stakes in the company worth $486.74 million. Adage Capital Management was the top shareholder of Under Armour Inc (NYSE:UA) in the second quarter, with a $96.69 million stake consisting of 12.75 million shares.
02. Lululemon Athletica Inc. (NASDAQ:LULU)
Number of Hedge Fund Holders as of Q2, 2022: 50
Based in Canada, Lululemon Athletica Inc. (NASDAQ:LULU) is an athletic apparel retailer. Lululemon Athletica Inc. (NASDAQ:LULU) is expected to grow earnings per share by an average of 21.73% per year over the next five years. Lululemon Athletica’s (NASDAQ:LULU) Q2 comparable sales and margin performance surprised analysts, who now have a generally bullish outlook on the sports apparel firm. On October 13, Raymond James analyst Rick Patel began coverage of Lululemon Athletica Inc. (NASDAQ:LULU) with a Strong Buy rating and $345 price target as analyst started coverage on athletic global brands.
Hedge fund sentiment around Lululemon Athletica (NASDAQ:LULU) has improved. Out of the 895 hedge funds that Insider Monkey was following, 50 had Lululemon Athletica Inc. (NASDAQ:LULU) holdings at the end of the second quarter of 2022, with a total market value of $1.266 billion. Compared to the previous quarter, 44 hedge funds held stakes totaling about $763 million.
Citadel Investment Group was the largest stakeholder in the company, with shares worth $290.49 million. Steve Cohen’s Point72 Asset Management and Israel Englander’s Millennium Management are significant company stakeholders as of Q2, 2022.
01. NIKE, Inc. (NYSE:NKE)
Number of Hedge Fund Holders as of Q2, 2022: 72
Topping the list of best sporting goods stocks to invest in is NIKE, Inc. (NYSE:NKE), one of the most recognizable footwear and apparel brands in the world. It also sells sports equipment and accessories, including golf clubs, baseball bats, gloves, and watches. NIKE, Inc. (NYSE:NKE) is transitioning away from retail outlets to online sales, with great success, as digital revenue topped $10 billion in FY22. NIKE, Inc. (NYSE:NKE) also topped fiscal 2023 Q1 revenue estimates with $12.7 billion in sales. The stock paid a dividend of $0.31 on October 3, with a forward dividend yield of 1.38%.
On October 13, Raymond James analyst Rick Patel initiated coverage of NIKE, Inc. (NYSE:NKE) with an Outperform rating and a $99 price target. Hedge fund ownership of NIKE, Inc. (NYSE:NKE) ticked up during Q2 as money managers looked to buy into the iconic brand at a discount. Nike shares fell by 46% year to date as of October 24. At the end of Q2, 72 hedge funds had a collective stake in the company valued at $3.34 billion. This was up from Q1 2022 when only 67 hedge funds held stakes worth $3.98 billion in the stock. Ken Fisher’s Fisher Asset Management is the leading shareholder of NIKE, Inc. (NYSE:NKE) during Q2, holding 8.5 million shares.
Here is what Ensemble Capital specifically said about NIKE, Inc. (NYSE:NKE) in its Q3 2022 investor letter:
“NIKE, Inc. (NYSE:NKE) (-18.4%): The company spent most of the quarter trading about in line with the overall market. But on the last day of the quarter, they reported earnings that demonstrated strong consumer demand, but a series of geographic and product level inventory level issues. Given the start-stop nature of their production during COVID, strained global supply chains, and China consumers popping in and out of lockdowns, the company ended up with too much apparel inventory and announced they’d be slashing prices on certain items to reset inventory to appropriate levels quickly.”
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