A hedge fund manager, Bryn Talkington of Requisite Capital Management, expressed concerns about Nike’s (NKE) strategy amidst the company’s ongoing manufacturing relocation to Vietnam. Despite President Trump’s recent conversation with the Vietnamese general secretary, which may lead to a reduction in tariffs, Talkington believes the US and Vietnam are heading for a “reckoning” over manufacturing jobs.
The hedge fund initially purchased Nike shares in 2016, delivering a total return of around 60% during its holding period. However, it has since lost confidence in the company’s ability to compete with peers like Adidas, Lululemon, and On Running, which have gained market share by cancelling relationships with wholesalers.
Talkington notes that Nike’s recent slowdown in growth, attributed to a weak consumer environment, appears deeper than expected. The hedge fund also sees significant narrowing of the range in Nike’s portfolio, as well as a complete refresh underway, with a focus on innovation and greater brand investment.
Despite Nike’s strong foundations, including number-one market share, robust supply chain, and strong balance sheet, Talkington views the company’s problems as more than just a weakening consumer environment. The hedge fund believes a diminished ability to compete with peers and a misstep in strategy are major concerns, which could lead to a “multi-year” reset for the firm.
As a result, the hedge fund has lost confidence that Nike’s stock will be able to reinvigorate growth back into its product portfolio in a desired time frame.
Source: https://www.insidermonkey.com/blog/10-stocks-to-watch-as-trade-wars-begin-1516034/2