In this article, we discuss 5 stocks in trouble as Americans cut back on spending. If you want to see more stocks in this list, check out 10 Stocks In Trouble as Americans Cut Back on Spending.
5. Farfetch Limited (NYSE:FTCH)
Number of Hedge Fund Holders: 45
Farfetch Limited (NYSE:FTCH) is a London-based company that offers online premium fashion retail services. The company provides clothes, shoes, accessories, and jewelry from hundreds of different brands. JPMorgan analyst Doug Anmuth on June 29 lowered the price target on Farfetch Limited (NYSE:FTCH) to $16 from $20 and maintained an Overweight rating on the shares. The analyst cut estimates and price targets on 26 companies in his interest coverage due to macro challenges, currency movement, and company-specific factors. With inflation reaching a 40-year high in May, fuel costs soaring 45% since February, credit card data showing softening consumer spending, and reduced consumer confidence, JPMorgan also expects a 66% chance of recession over the next two years and an 83% chance over the next three years, noted the analyst.
Among the hedge funds tracked by Insider Monkey, 45 funds were long Farfetch Limited (NYSE:FTCH) at the close of Q1 2022, compared to 47 funds in the earlier quarter. Stephen Mandel’s Lone Pine Capital is the biggest stakeholder of the company, with 17.20 million shares worth $260 million.
Here is what Polen U.S. Small Company Growth Fund has to say about Farfetch Limited (NYSE:FTCH) in its Q1 2022 investor letter:
“We also initiated a position in global luxury fashion e-commerce marketplace Farfetch in the first quarter and took advantage of meaningful weakness in the company’s share price during the period. Farfetch previously had too large a market cap for the Portfolio, but it has since moved to a level where it’s appropriate to own it – both in this Portfolio and in our smid-cap strategy. The company’s fundamentals remain attractive as indicated by the compelling results Farfetch reported in February.
The company remains an early mover with “the world’s only truly global marketplace for luxury at scale”. Farfetch has a broader reach around the world with a diversity of brands that is much larger than its competitors. Many of the items it sells are exclusive. Our research shows that its brand assortment, brand image, geographic breadth, an inventory-light business model, a more compelling offering for luxury partners, and artificial intelligence are all competitive edges for the company. We believe Farfetch is well-positioned for the continued market share shift from offline to online in this category. The personal luxury goods market has trailed other categories in online penetration, but consumer behaviors and preferences shifted as a result of the pandemic creating more comfort with purchasing goods like this online. Changed behavior and the general shift to a higher portion of Millennial and Gen Z luxury shoppers supports this continued shift as does the growth in emerging market demand.”
4. Ford Motor Company (NYSE:F)
Number of Hedge Fund Holders: 46
Ford Motor Company (NYSE:F) is an American multinational automaker that manufactures and sells automobiles, luxury vehicles, commercial vehicles, automotive parts, pickup trucks, and SUVs. On June 1, Goldman Sachs analyst Mark Delaney slashed the price target on Ford Motor Company (NYSE:F) to $14 from $18 and kept a Neutral rating on the shares. In the U.S. autos and industrial technology sector, he broadly lowered estimates and price targets to better reflect ongoing supply chain constraints in the near-term and weaker demand in the intermediate-term, the analyst told investors. He reduced his sales projections with his U.S. SAAR forecasts for 2022 and 2023 now at 14.5 million and 15.75 million units, respectively.
D E Shaw is the largest position holder in Ford Motor Company (NYSE:F), with 31.2 million shares worth $528.3 million. Overall, 46 hedge funds were bullish on the stock at the end of Q1 2022, down from 53 funds in the preceding quarter.
Here is what Baron Fund has to say about Ford Motor Company (NYSE:F) in its Q1 2022 investor letter:
“Ford (NYSE:F) is another example of typical industrial manufacturing business executive mindsets. The April 18, 2022, Bloomberg Businessweek cover story features Ford CEO Jim Farley behind the wheel of an electrified Ford F-150 Lightning. The article is titled, “Hey Elon, THIS is a truck.” I thought the article was terrific. One idea especially stood out to me. Since the F-150 is such a popular vehicle, it “argued for a gradual approach to electrification. Essentially the company retrofitted an existing F-150 with an electric powertrain rather than develop an entirely new truck.” No all-in financial and operation bet by this company on electrification.”
3. Target Corporation (NYSE:TGT)
Number of Hedge Fund Holders: 50
Target Corporation (NYSE:TGT) is one of the biggest American general merchandise retailers. Credit Suisse analyst Robert Moskow on June 10 reaffirmed an Outperform rating and a $180 price target on Target Corporation (NYSE:TGT), but lowered his FY22 EPS estimates to $8.59 from $13.56 after the company announced that the FY22 profit expectations were reduced further as it “focuses on getting through the unwanted inventory pile-up resulting from consumers shifting their spending from discretionary products to essentials”. This comes on the heels of an already slashed profit outlook issued with the company’s Q1 earnings.
According to Insider Monkey’s database of elite hedge funds, Target Corporation (NYSE:TGT) was part of 50 public hedge fund portfolios at the conclusion of the first quarter of 2022. Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital is the leading shareholder of the company, with a position worth $530.5 million.
Here is what Nelson Capital Management has to say about Target Corporation (NYSE:TGT) in its Q2 2021 investor letter:
“We added Target (tkr: TGT) to our consumer staples sector. Target Corporation (NYSE:TGT) offers a broad array of products in owned and known brand items at affordable prices. Its omni-channel fulfillment centers allow customers to receive their items via in-store pickup, curbside pickup, same-day shipping and regular shipping while simultaneously reducing operating costs. With a significantly lower valuation than peers and a unique operating strategy, Target is an attractive holding.”
2. NIKE, Inc. (NYSE:NKE)
Number of Hedge Fund Holders: 67
NIKE, Inc. (NYSE:NKE) is an American multinational company that offers athleisure, sports equipment, and accessories. On June 29, Barclays analyst Adrienne Yih cut the price target on NIKE, Inc. (NYSE:NKE) to $125 from $140 and reiterated an Overweight rating on the shares after the fiscal Q4 earnings. NIKE, Inc. (NYSE:NKE)’s guidance for fiscal 2023 indicates below consensus earnings given the short-term pressure on inventory due to the situation in China, the analyst told investors. The analyst also reaffirmed that while NIKE, Inc. (NYSE:NKE)’s algorithm through fiscal 2025 “should remain intact”, upside is possibly limited due to overall consumer slowdown as economic pressures plough on.
In Q1 2022, NIKE, Inc. (NYSE:NKE) was found to be part of 67 hedge fund portfolios, with collective stakes worth about $4 billion, compared to 68 funds in the previous quarter, with stakes in the company valued at $5.4 billion. Ken Fisher’s Fisher Asset Management is the leading position holder in NIKE, Inc. (NYSE:NKE), with 8.2 million shares worth $1.11 billion.
Here is what ClearBridge All Cap Growth Strategy has to say about NIKE, Inc. (NYSE:NKE) in its Q4 2021 investor letter:
“Nike is another play on e-commerce as well as the anticipated growth in consumer spending as we learn to live with COVID-19. After selling out of the stock in 2016 due to competitive concerns, we were motivated to repurchase shares because of optimism around a new management team’s focus on accelerating Nike’s shift toward e-commerce and direct-to-consumer (DTC) distribution. Near-term supply chain issues in Vietnam and retail weakness in China that we see as ephemeral provided a good buying opportunity. We do not believe the market is giving proper credit to Nike’s potential to deliver attractive, high-single-digit revenue growth while delivering operating margin expansion as more merchandise is sold directly. Nike is also still under indexed to the women’s category, which we see as a significant ongoing catalyst.”
1. General Motors Company (NYSE:GM)
Number of Hedge Fund Holders: 76
General Motors Company (NYSE:GM) is a Michigan-based multinational automobile manufacturer that markets and sells its products under the Chevrolet, Buick, GMC, and Cadillac brands. Mark Delaney, a Goldman Sachs analyst, lowered the price target on General Motors Company (NYSE:GM) to $46 from $59 on June 1 and maintained a Buy rating on the shares. He is widely cutting estimates and price targets across the US auto sector to accurately account for additional supply chain challenges in the short-term and slower demand in the medium-term, the analyst told investors.
Among the hedge funds tracked by Insider Monkey, General Motors Company (NYSE:GM) was part of 76 public hedge fund portfolios at the end of Q1 2022, down from 90 funds in the preceding quarter. Warren Buffett’s Berkshire Hathaway is the largest shareholder of the company, with over 62 million shares worth $2.7 billion.
Here is what Oakmark Global Fund has to say about General Motors Company (NYSE:GM) in its Q1 2022 investor letter:
“General Motors (NYSE:GM) was a detractor during the quarter, due to increased macro uncertainty, higher fuel prices, and concerns over rising input costs, which pressured the company in particular and the auto industry as a whole. While we are closely monitoring the potential impact of these dynamics, industry demand remains robust, driven by strong consumer balance sheets and pent-up demand after multiple years of constrained production. We also remain confident in GM’s ability to navigate a complex operating environment, which the company has consistently demonstrated over the past few years. Finally, the long-term picture remains bright. We believe GM is significantly undervalued, is well-positioned for the long-term transition to electric vehicles and has numerous needle-moving ancillary business opportunities (most notably Cruise, which is an industry leader in autonomous vehicle technology) that are under-appreciated.”
You can also take a look at Michael Burry is Buying These 10 Stocks As Recession Fears Mount and Bill Gates’ Latest Stock Portfolio: Top 10 Picks.
