We recently compiled a list of the 10 Worst Performing Blue Chip Stocks in 2024. In this article, we are going to take a look at where NIKE, Inc. (NYSE:NKE) stands against the other worst performing blue chip stocks in 2024.
Strong Market Performance Amid Uncertainty
The third quarter ended with a bang, with all the major indices near record highs as investors shunned macroeconomic instability, soaring geopolitical tensions and U.S. election uncertainty. Strong gains in the quarter were fuelled by expectations of lower interest rates heading into year-end and growing expectations of a soft landing of the U.S. economy.
Artificial intelligence has been a big success story that has helped push the equity markets to record highs. Against the overall trend, the current bull market had a better second year, up 33% compared to the historical average of 13%, and a better first year, up 22% compared to the historical average of 44%, according to BofA. It’s also important to remember that even bull markets’ third years of growth can be rocky.
READ ALSO: 10 Most Promising Future Stocks According to Analysts and 10 Most Promising Growth Stocks According to Hedge Funds.
While the S&P 500 has gained over 60% since the 2022 lows, researchers at BofA note that there could be a significant pullback in the near future.
“Historical studies suggest that the third year of a typical bull market tends to be unremarkable as a mild bout of de-rating overshadows humdrum earnings growth,” BofA equity strategist Ritesh Samadhiya said in a note to clients.
Economic Concerns and Investment Opportunities
While voicing concern that the economy is running at a hotter-than-desired pace, Federal Reserve Governor Christopher Waller hinted that future interest rate cuts would be less drastic than the significant move in September. According to policymakers, recent employment, inflation, GDP, and income reports indicate that the economy might not slow down.
“While we do not want to overreact to this data or look through it, I view the totality of the data as saying monetary policy should proceed with more caution on the pace of rate cuts than was needed at the September meeting,” Waller said in prepared remarks for a conference at Stanford University.
The sentiments come as investors remain cautious about the long-term outlook amid soaring geopolitical tensions and economic uncertainties. The growing uncertainties have been one of the catalysts behind some of the worst-performing blue chip stocks in 2024.
Nevertheless, some underperforming stocks may allow investors to purchase the long-term decline. However, many are just dealing with issues unique to their company, such as bloated balance sheets or broken business models.
It might be a while before the market bounces back. In the interim, investors should be aware of the market’s possible value stocks. Even if it is not popular or profitable in the short term, the long-term benefits of investing wisely and deviating from the crowd can be significant, according to the contrarian investing philosophy.
Investing during a market downturn may present chances for sizable returns in the long term. We examine the top 10 blue-chip losers to date and potential opportunities for investors to acquire them.
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Our Methodology
To prepare this article, we began by listing all the holdings of the various blue chip ETFs like E.A. Bridgeway Blue Chip ETF, Vanguard Mega Cap ETF, and DOW 30. We then sourced the year-to-date share price returns for each company. Based on these returns, we ranked the companies in descending order.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
NIKE, Inc. (NYSE:NKE)
Year to Date Return: -24%
Number of Hedge Fund Holders: 66
NIKE, Inc. (NYSE:NKE) is one of the most iconic brands in the world as it designs, develops and markets some of the most sought-after athletic footwear apparel equipment and accessories. Nevertheless, it has turned out to be one of the worst-performing blue chip stocks in 2024, going down by about 24% year to date.
The underperformance comes against the backdrop of disappointing results that underscore the fact that the company desperately needs a turnaround. In its most recent fiscal first quarter, 2025, revenue was down by 10% to $11.9 billion as earnings fell 26% to $0.70 a share. Revenue in the company’s direct-to-consumer arm was down 13%
The weak financial results come from NIKE, Inc. (NYSE:NKE)’s core business feeling the full brunt of high interest rates and high inflation that have significantly affected consumer purchasing power.
In an effort to lessen its reliance on outside merchants, Nike has increased its direct-to-consumer Nike Direct channel, which includes both its online store and physical locations, over the last ten years. At first, that tactic protected its brand from markdowns by third parties, locked in its customers, and expanded its moat against rivals.
Even as it attempts to revitalize its business by introducing new products, shifting to a product mix that includes a higher percentage of luxury shoes, and strengthening its ties with customers through sponsored events and activities, NIKE, Inc. (NYSE:NKE) anticipates that the slowdown will persist. In fiscal 2025, analysts predict a 7% and 28% drop in revenue and earnings, respectively.
Nike’s dividend yield has increased while its stock price has stagnated. Nike announced a 9% dividend increase in November 2023, the 22nd year in a row that the company has done so. Nike’s current yield is a commendable 1.8%. The value of Nike has also decreased.
According to Insider Monkey’s database, 66 hedge fund portfolios held NIKE, Inc. (NYSE:NKE) at the end of Q2 2024, down from 71 in the previous quarter.
Here is what Coho Relative Value Equity Strategy said about NIKE, Inc. (NYSE:NKE) in its Q2 2024 investor letter:
“While we believe each of those companies is performing in line with or better than our expectations and that the moves lower are unjustified, both CVS and NIKE, Inc. (NYSE:NKE) reported disappointing performance in recent results. For Nike, the company reported mixed fourth quarter Fiscal 2024 results and weak Fiscal 2025 guidance, reflecting top line pressure from lifestyle product slowing, lower digital sales and increased macro headwinds in international markets. To manage through the decline in sports footwear and apparel demand, the senior leadership team is focused on cutting costs and reinvesting in marketing and innovation to drive sales. The company is starting to see green shoots for performance product innovation and has historically emerged stronger from these downturns due to benefits from a leading market position and scale.”
Overall NKE ranks 3rd on our list of the worst performing blue chip stocks in 2024. While we acknowledge the potential of NKE as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NKE, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
