Billionaire Investors Are Buying Nike. Should You Follow Them?
Nike (NYSE: NKE) is one of the best-performing consumer goods stocks of all time. Shares are up more than 46,000% since the company's 1980 initial public offering and would have turned a $1,000 investment into more than $767,120 during that time (with dividends reinvested).
More recently, Nike's stock has struggled, and it's down more than 52% from its peak in mid-2021. Growth has slowed, even turning negative recently as the athletic shoe and apparel manufacturer lost market share to younger rivals like On Holding and Deckers' Hoka brand. Its strategic shift to the direct-to-consumer channel, which came along with an underinvestment in brand marketing, now seems to be backfiring.
While Nike's struggles are evident, some investors are exploring the opportunity that comes with a sell-off of a longtime industry leader. Let's take a look at a few of the billionaire investors who just scooped up shares of Nike at a discount.
Image source: Nike.
Bill Ackman's Pershing Square Capital Management buys in
Bill Ackman is one of the best-known hedge fund managers on Wall Street. Once called "Baby Buffett," Ackman went long on Chipotle when the stock was still reeling from the E. coli crisis. He also bought hedges shortly before the onset of the COVID-19 pandemic that yielded 100 times their return, turning $27 million into $2.6 billion, and protecting his portfolio in the process.
Ackman tends to only hold a handful of stocks at once, unlike most of his billionaire investor peers. This means he prefers a concentrated portfolio of high-conviction stocks over a broad, diversified portfolio.
So it was noteworthy when Ackman's Pershing Square fund reported that it had taken a stake in Nike in the second quarter, buying 3.04 million shares of the stock, which is worth roughly $2.5 billion today.
It's not clear why Ackman bought Nike, but he might see a similar turnaround potential to what he saw in Chipotle, as Nike is a strong brand that seems temporarily impaired. New leadership might help refresh the company, much like what happened with Chipotle. Investors were pleased by Ackman's decision to take a stake, as Nike's stock jumped on the news.
Jeff Yass' Susquehanna takes a stake in Nike
Another buyer of Nike in the second quarter was Jeff Yass' Susquehanna International Group. This proprietary global trading firm has made Yass a billionaire with the help of an early investment in Chinese company Bytedance, the TikTok parent, of which it owns a 15% stake. The company is also known for its quantitative approach to investing.
Among the stocks it purchased in the second quarter was Nike. Susquehanna added more than 5.4 million shares of Nike in the quarter, bringing its stake to 6.1 million, or roughly $500 million worth of Nike.
It's not clear why Yass' firm bought Nike stock, but, like Ackman, it's likely he sees the beaten-down stock as a good value play at the moment.
Ken Griffin's Citadel Advisors
Ken Griffin's Citadel, which is known as the most profitable hedge fund company of all time, also added to its Nike stake in the second quarter. Citadel added 1.1 million shares to its Nike holdings, bringing it up to 3.2 million, or roughly $250 million.
Citadel has historically favored a quantitative and diversified approach, using technology and algorithmic investing to identify trading opportunities. The company has thousands of investments, so it's unlikely to make a comment on the Nike holding, as it's just a small piece of its broad portfolio.
Should you buy Nike stock?
There aren't any signs of a turnaround in Nike's business yet, so investing right now might be premature. However, the interest from top billionaire investors indicates that the price might have fallen enough to take a chance on the stock.
Nike is still targeting a decline in revenue for the fiscal year, and it's clear that there are structural issues in the business that need to be fixed. I own some stock, but I'd like to see some meaningful improvements in the business before I buy more shares.
Having said that, I think Nike should eventually recover. Its brand recognition and marketing reach is unmatched, as is its roster of athletes. It might take a new management team to set the company on the right course, but over the long term, Nike should leave its current challenges behind and get back to growth.
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Jeremy Bowman has positions in Nike. The Motley Fool has positions in and recommends Nike. The Motley Fool recommends On Holding and recommends the following options: long January 2025 $47.50 calls on Nike. The Motley Fool has a disclosure policy.
