We recently published a list of Jim Cramer’s Latest Calls: 10 Stocks to Buy and Sell Now. Since Nike Inc (NYSE:NKE) ranks 6th on the list, it deserves a deeper look.
Jim Cramer in a recent program on CNBC yet again talked about the importance of investing in individual stocks and said with discipline and patience beginner investors can beat the market by picking solid stocks with strong fundamentals.
“If you are willing to put in the work, regular people can trounce the averages as long as you are disciplined and you follow the rules,” Cramer said.
Talking about his stock-picking process, Cramer said that he likes to “start” hunting for stocks by going through the list of stocks making new highs. This is a good start, according to Cramer, because a lot of times momentum keeps pushing the same stocks higher and higher unless something fundamentally changes. Cramer said he does not recommend buying stocks when they are trading at new highs. Instead, he waits for a pullback.
“New high list is not a shopping list it’s an inspirational list. You keep an eye on those names and then wait for them to come down before you pull the trigger,” Cramer said.
Cramer said that you should only pile into stocks on a pullback if you believe they will rebound for reasons “unrelated to the broader market.”
For this article, we picked 10 key stocks Jim Cramer is talking about during his programs these days. With each stock, we have mentioned the number of hedge fund investors. Why are we interested in 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).
A close-up of a hand holding a casual sneaker with the Nike logo on it.
Nike Inc (NYSE:NKE)
Number of Hedge Fund Investors: 66
Commenting on Nike Inc (NYSE:NKE) in a latest episode of “Mad Dash” on CNBC, Cramer said:
“Right now, it is just downhill but the people, the people out in Nike, they seem oblivious.”
Nike Inc (NYSE:NKE) has indeed been a loser this year, down about 21% so far. Nike is getting battered in China amid declining sales as consumers cut back on spending due to rising inflation.
However, Nike Inc (NYSE:NKE) bulls believe the company will be able to come out of this crisis following rate cuts and the easing of global economic situation. Nike remains a giant, with about $11 billion in cash, sufficient to cover its $8.9 billion long-term debt. Nike Inc (NYSE:NKE) is also the leader in the footwear market which is expected to grow at a CAGR of 6.86% from $173.89 billion in 2024 to $242.33 billion by 2029. Nike Inc (NYSE:NKE) sales in the market are about 100% higher than Adidas, the second-biggest player in the market.
Another strong reason to own Nike Inc (NYSE:NKE) shares is its dividend, which has grown for two decades now without a break.
Nike Inc (NYSE:NKE) has a forward P/E ratio of about 29, about 18% lower than its five-year average. This makes the stock undervalued for long-term investors with a large risk appetite.
Mar Vista Focus strategy stated the following regarding NIKE, Inc. (NYSE:NKE) in its Q2 2024 investor letter:
“NIKE, Inc.’s (NYSE:NKE) stock declined following management’s revised forecast for fiscal year 2025, projecting negative mid-single-digit revenue growth instead of the previously anticipated positive growth. The company has observed a marked slowdown in lifestyle product sales since April, a trend that persisted into June. Our current projections indicate that both sales and earnings will fall 15-20% below the conservative estimates set by management just a quarter ago. This substantial downward revision in sales and earnings is attributed to insufficient product innovation, wholesale channel shift, and intentional reduction of supply in lifestyle franchises. While the negative adjustments to guidance could potentially act as a clearing event for the stock, the degree of conservatism in the new projections remains uncertain. Nike maintains its position as the global leader in sportswear. However, its revenue growth has been hampered by a lack of innovation, and its recovery is further complicated by deteriorating macroeconomic conditions in the US and China. The company’s renewed focus on innovation and efforts to re-engage with wholesale channels may eventually help restore growth, but we believe increased skepticism regarding management’s ability to execute is justified.”
Overall, Nike Inc (NYSE:NKE) ranks 6th on Insider Monkey’s list titled Jim Cramer’s Latest Calls: 10 Stocks to Buy and Sell Now. While we acknowledge the potential of Nike Inc (NYSE:NKE), 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 NIKE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
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