1. NIKE, Inc. (NYSE:NKE)
Number of Hedge Fund Shareholders: 73
Topping the list of shoe stocks to buy now is NIKE, Inc. (NYSE:NKE), one of the most recognizable footwear and apparel brands in the world. Nike also sells sports equipment and accessories, including golf clubs, baseball bats and gloves, and watches.
Nike is in the midst of transitioning away from retail outlets to online sales, with great success, as digital revenue topped $10 billion in FY22. Nike topped fiscal 2023 Q1 revenue estimates with $12.7 billion in sales, but investors have become worried about the company’s growing inventory backlog ahead of what’s expected to be a challenging period for consumer discretionary stocks. Nike’s falling margins have also raised concern, with management expecting FY23 Q2 gross margins to slide by 3.5 to 4 percentage points year-over-year.
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 38% during the first half of 2022. Jim Simons’ quant fund Renaissance Technologies initiated a large position in NKE during Q2, buying 2.08 million shares.
Madison Funds is bullish on NIKE, Inc. (NYSE:NKE)’s future growth, laying out some of the reasons why in its Q2 2022 investor letter:
“NIKE, Inc. (NYSE:NKE) is the largest seller of athletic footwear and apparel in the world. Started from humble beginnings as Phil Knight’s “crazy idea” in a Stanford entrepreneurship class, Nike marked its 50th anniversary this year. By remaining true to its innovative culture, the brand is as strong as ever and continues to generate attractive growth, soon to surpass $50 billion in annual revenue. In addition to the continuous investments in brand innovation and marketing, over the last few years Nike has invested heavily to lay the foundation for multi-channel commerce. Today, Nike generates approximately 40% of its revenues through its online channel and branded storefronts. Empowered by CEO John Donahoe’s “Nike Consumer Direct Offense,” Nike’s ongoing investments are expected to further drive their overall revenue mix towards the direct-to-consumer channel which we estimate will result in substantial margin improvement over the next three to five years.
While Nike’s business in China, which accounts for approximately 20% of revenue, is experiencing challenges today, our due diligence suggests that consumer preference for the Nike brand outside the U.S. remains incredibly strong. Overall, we expect Nike’s broader ecosystem, often referred to as the Nike Marketplace, to continue to leverage the company’s innovation and premier brand to build direct consumer relationships which deepen Nike’s competitive moat and enhance its financial profile. Turbulence in the Chinese market and concerns over consumer spending in the US and Europe enabled us to initiate a position in Nike at an attractive discount to our appraisal of the company’s long-term value.”
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