Nike Inc (NYSE:NKE) has had a nice run over the last 12 months, climbing 38% over that time. The stock now trades at its 52-week high and has reached a rich valuation. Nike’s trailing P/E is 30 and its forward P/E is 27.6. In comparison, the S&P 500 trades at a trailing P/E of 19.4 and a forward P/E of 18.6. Still, Nike is cheaper on a relative basis than its competitor, Under Armour Inc (NYSE:UA). Under Armour trades at trailing and forward P/E multiples of 88 and 58, respectively. Both companies trade high looking out even further, but Nike still trades relatively lower on a PEG basis. Nike’s PEG ratio is 2.24, while Under Armour Inc (NYSE:UA)’s is 3.2. Any way you cut it, both companies are expensive when considering the valuation metrics explored here.
Insider activity at Nike has been routinely characterized by the exercise of options followed by the selling of those shares. No major acquisitions or dispositions have occurred in the last couple of months, but Jeanne Jackson, Nike Inc (NYSE:NKE)’s President of Product and Merchandising, sold 16,000 shares in June after exercising options for the same amount. Save for 790,000 shares acquired by insiders through non-open market transactions, selling has predominated insider activity in the shares of Under Armour. The most significant recent insider selling in Under Armour occurred back in April when insiders sold 420,000 shares.
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In addition to insider buying and selling, hedge fund activity in the shares of Nike and Under Armour has been mixed. Lansdowne Partners, the number one holder of Nike’s shares among hedge funds in our database, reduced its position in Nike by 6% to $880 million in its latest filing; nonetheless, Nike still accounts for almost 8% of Lansdowne’s portfolio. Lone Pine Capital became the number two holder of Nike’s shares after initiating a $569.7 million position that now represents 2% of its public equity portfolio. Like Lansdowne, Donald Chiboucis‘ Columbus Circle Investors decreased its position in Nike by 23% to $288 million. Unlike Lansdowne and Columbus, Scopus Asset Management increased its position in Nike’s shares by 101% to $125.7 million.
Columbus Circle took the opposite action with its Under Armour stake, increasing its position by 1% to $169.5 million in its latest 13F filing. D. E. Shaw reduced a position of put options underlying Under Armour shares by 43% to a value of $30.3 million, and Citadel increased a position of call options underlying Under Armour shares by 48% to $28.4 million; moreover, Citadel reduced its own put position by 34% to $15.8 million. Jim Simons over at Renaissance Technologies increased his position and Peak6 Capital did the same. Renaissance raised its stake by 340% to $28.2 million, while Peak6 increased its position by 168% to $23.5 million. Additionally, new positions in Under Armour’s shares were created by Ivory Capital and Tiger Eye Capital. Ivory initiated a $23.4 million position, and Tiger Eye followed suit with a new $23 million stake.
Overall, the sentiment from hedge funds is more positive on Nike Inc (NYSE:NKE) than on Under Armour Inc (NYSE:UA), with 56 funds holding $2.94 billion worth of the former’s shares, while just 23 funds held $338 million worth of Under Armour’s shares. Funds were particularly bearish on Under Armour during the first quarter, with fund ownership dipping to 23 from 29, and the aggregate value of their holdings decreasing slightly, despite a big quarter for the stock in which it gained over 15%, which means funds sold off more than 15% of their holdings, collectively. As mentioned earlier, Nike is a better value than its more junior competitor, though investors in either company should monitor their stakes closely, as the valuations suggest there is not much more room to run for either company. We recommend avoiding Under Armour and considering no more than a small stake in Nike.
Winner: Nike (NKE)
Disclosure: None
