We recently published a list of Jim Cramer’s Latest Portfolio: 10 Stocks to Buy and Sell. Since On Holding AG (NYSE:ONON) 8th on the list, it deserves a deeper look.
Jim Cramer in a new program discussed the latest market selloff again, saying the notion the broader meltdown was because of “hard landing” fears is “totally false.” Cramer said that it was all related to the Japanese stock market and Yen, and “nothing more.”
“A bunch of money managers took advantage of how you can borrow against Japanese bonds which had a very low interest rate and then have relatively free money which you can put to work in stocks all around the globe, including here (the US),” Cramer said.
Jim Cramer said that small-cap stocks are “trying to come” back. However, he pointed to an “issue” with the small-cap rally. He said that no one actually bought individual small-cap stocks and instead loaded up on ETFs. Investors, according to Cramer, “walked away” when the broader market wavered.
For this article we watched the latest programs on Cramer recently aired on CNBC and picked 10 stocks he’s talking about. With each company 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 team of athletes showcasing the company’s athletic footwear in an outdoor stadium.
On Holding AG (NYSE:ONON)
Number of Hedge Fund Investors: 34
Jim Cramer has long been a bull on ONON. Recently, a caller asked him whether he should buy or hold the stock. Cramer said, “you should add it.”
Performance footwear company On Holding AG (NYSE:ONON) is operating in a highly competitive industry, but it also has high barriers to entry. Analysts are paying attention to the company’s ‘Lightning and Rain’ strategy to elevate brand recognition. The approach, highlighted during the company’s Q1 earnings call, focuses on winning races at the elite level and gaining market share among everyday runners. Here is what On management said during the earnings call about this strategy:
The lightning and rain strategy, winning on the racecourse with next level innovation, and gaining market share with everyday runners, continues to deliver for the On brand. Three weeks ago, Hellen Obiri won the marathon in Boston for the second time, the first woman in two decades to go back to back. She was running in On head to toe, including a groundbreaking new footwear technology, which On will reveal in Paris this summer. We would like congratulate Helen and also thank our innovation team for the incredible work in developing the fastest raised products. The reign element of this strategy means converting the credibility of our innovations and athlete successes to market share gains, with everyday runners enjoying their local running routes.
Read the full earnings call transcript here.
More and more athletes are using On shoes, including Obiri, tennis stars Ben Shelton and Iga Swiatek, and track athletes Yared Nuguse and Olli Hoare.
On Holding AG (NYSE:ONON) has growth revenue at a 58% CAGR and operating income at a 124% CAGR since 2019. The company turned profitable in 2022 and has since expanded its margins. Free cash flow has improved dramatically, and On Holding AG (NYSE:ONON) remains debt-free.
Margin expansion is central to On’s strategy, with revenues growing faster than SG&A expenses, contributing to operating leverage. The company is also ramping up marketing efforts, with marketing expenses as a percentage of sales at 10.9% in 2023, slightly up from 10.7% in 2022. These investments include digital acquisition, sponsorships with elite athletes, and collaborations with artists, all aimed at driving brand awareness.
The stock is already up 50% so far this year. Wall Street expects the company’s revenue to grow about 26% while earnings growth is estimated at 50% for the next five years annually. On Holding AG (NYSE:ONON) is spending more to grow and it seems the stock still has some growth runway before it loses steam.
Artisan Small Cap Fund stated the following regarding On Holding AG (NYSE:ONON) in its first quarter 2024 investor letter:
“We initiated new GardenSM positions in On Holding AG (NYSE:ONON) during the quarter. On is an emerging global athletic sports brand focusing on performance footwear. Performance running footwear is one of the most challenging categories to break into, requiring a high degree of technical knowledge, significant investment spending and marketing prowess, each of which On has acheived over the years. The company’s foundation in performance footwear provides a high barrier to entry and a strong and credible foundation for the brand to continue growing. We believe On will generate attractive growth as it scales across product categories, channels and geographies within the $300 billion global sportswear market.”
Overall, On Holding AG (NYSE:ONON) ranks 8th on Insider Monkey’s list titled Jim Cramer’s Latest Portfolio: 10 Stocks to Buy and Sell. While we acknowledge the potential of On Holding AG (NYSE:ONON), 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 ONON 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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