Nike (NKE) stock is one of the best-performing Dow Jones stocks Thursday thanks to news Bill Ackman's Pershing Square Capital Management took a new stake in the footwear and apparel retailer.
According to a 13F regulatory filing released Wednesday, Pershing Square bought more than 3 million shares of Nike stock in the second quarter. This works out to a roughly 0.2% ownership stake of the retailer and makes NKE the ninth largest position in the Pershing Square portfolio.
Per Whale Wisdom, Ackman's hedge fund is estimated to have paid an average of $75.37 per share for its Nike stake, which was worth roughly $230 billion at the end of Q2.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The addition of Nike to the Pershing Square equity portfolio increases its exposure to consumer discretionary stocks. Indeed, the fund's top three positions – Hilton Worldwide Holdings (HLT), Chipotle Mexican Grill (CMG) and Restaurant Brands International (QSR) – fall under this umbrella.
The new Nike stake also marks a return to the stock for Pershing Square Capital Management. In late 2017, the firm invested in Nike and made an estimated $100 million profit, according to Reuters.
Why would Ackman invest in Nike?
"Nike has been lacking any real innovation that reaches consumers," says Brian Mulberry, client portfolio manager at Zacks Investment Management. He adds that even the Jordan brand has struggled recently, while Lululemon Athletica (LULU) and Fabletics have taken the lead in the apparels market.
"Nike is also missing key brand ambassadors that were so critical to growth," he adds. "Tiger Woods, Lebron James, etc. are all aging athletes and have either left or are likely not to renew the large deals from the past. But that leaves them with no real superstar from any sport to help engage with younger consumers in particular."
However, this is likely why Ackman took a stake in Nike, Mulberry says. Not only did he scoop up NKE at an attractive valuation, but it gives him "a chance to make a positive impression on the future direction of the company, which he was able to do successfully seven years ago."
As such, the portfolio manager believes the board of directors and the executive team will "be happy to engage with Ackman rather than having him become a hostile activist."
Is Nike stock a buy, sell or hold?
Ackman scooped up Nike at a discount, considering it has been one of the worst Dow stocks of the year – with only Intel (INTC) and Boeing (BA) suffering bigger losses.
Still, Wall Street remains bullish on the blue chip stock. According to S&P Global Market Intelligence, the average analyst target price for NKE stock is $91.27, representing implied upside of about 12% to current levels. Additionally, the consensus recommendation is Buy.
Speaking for the bulls is Wedbush analyst Tom Nikic, who has an Outperform (the equivalent of Buy) rating and $97 price target on Nike.
Nikic admits that Nike is facing several challenges, as evidenced by the disappointing fiscal fourth-quarter earnings report its released in late June. The company also lowered its full-year sales forecast amid muted wholesale orders and a softer outlook in China.
However, the analyst is hopeful "that with management seemingly more clear-headed about the mistakes they've made, they can lean on NKE's vast resources (bigger budgets than any competitor in terms of research and development, marketing, etc.) to begin the road to recovery in 2025."
Related Content
-
Markets Are Quiet Ahead of Fed Day: Stock Market TodayInvestors, traders and speculators appear to be on hold amid an unusually fraught Fed meeting.
-
Quiz: Test Your Knowledge of the OBBB, Wealth Transfer and Early RetirementQuiz The financial professionals who contribute to Kiplinger's Adviser Intel recently wrote about the OBBB's impact on retirement, how to ensure your wealth passes to your family and early retirement questions.
-
Markets Are Quiet Ahead of Fed Day: Stock Market Today
Investors, traders and speculators appear to be on hold amid an unusually fraught Fed meeting.
-
5 Multibagger Stocks With Amazing Returns in 2025multibagger stocks As the term suggests, multibagger stocks multiply your money – gains of 1,200%, for example. Here's where to look for that kind of performance this year.
-
Investing Freebies: Perks You Get for Owning These StocksWhile the biggest investing returns come over the long term, these companies offer instant gratification for investors with several freebies and perks.
-
How an Expired Passport Thwarted Blackmail (and What Other Important Documents You Should Keep)An optometrist produced his expired passport to foil a blackmail attempt by the daughter of a former employee. After proving he was out of the country on the date of a forged diary entry, he took it a step further.
-
Optimize, Grow, Retain: The Power of Annual Client ReviewsFinancial advisers can use annual reviews to help enhance client outcomes, strengthen relationships and build their practice.
-
I'm a Real Estate Investing Pro: This Is What Investors Should Know About Truck Stop InvestmentsTruck stops might seem like good investments, but they can actually be a risky gamble due to unstable fuel prices, unreliable operators and coming changes in transportation. Instead, consider safer options like industrial or residential properties.
-
How Digital Platforms Are Changing the Way You Invest in GoldInvesting in gold is easier than ever thanks to digital platforms. Learn how online tools are lowering costs, increasing transparency and making gold accessible to all investors.
-
Stocks Rise to Start Fed Week: Stock Market TodayThe Nasdaq Composite and S&P 500 hit new record closing highs as Wall Street awaits the Fed's next rate cut.
