RiverPark Funds’ Top Q3 Detractor: Nike Inc. (NKE)

RiverPark Funds, an investment management company, released its “RiverPark Large Growth Fund” third quarter 2022 investor letter — a copy of which can be downloaded here. For the quarter, the RiverPark Large Growth Fund (the “Fund”) lost 3.3% – a bit better than the S&P 500 (-4.9% for the quarter) and about in line with the Russell 1000 Growth index (-3.6% for the quarter). Try to spare some time to check the fund’s top 5 holdings for you to have an idea about their best stock picks this 2022.

In its Q3 2022 investor letter, Leaven Partners mentioned NIKE, Inc. (NYSE:NKE) and explained his insights for the company. Founded in 1964, NIKE, Inc. (NYSE:NKE) is a Beaverton, Oregon-based footwear manufacturing company with a $143.5 billion market capitalization. NIKE, Inc. (NYSE:NKE) delivered a -44.97% return since the beginning of the year, while its 12-month returns are down by -44.00%. The stock closed at $91.72 per share on October 25, 2022.

Here is what Leaven Partners has to say about NIKE, Inc. (NYSE:NKE) in its Q3 2022 investor letter:

Nike: NKE shares were a top detractor this quarter on higher inventory balances leading to lower-than-expected gross margins for the next couple of quarters. The company reported 1Q23 sales and EPS beats, but freight costs, markdowns, and the strong dollar weighed on gross margins. Nike continues to expect low double-digit currency-neutral sales growth, but the strong dollar will reduce overall sales growth and discounted inventory will further reduce gross margins for the year.

Nike is, by far, the leading athletic footwear, apparel, and equipment company in the world with over $46 billion in revenue, $6 billion in 2021 annual free cash flow, and over $4 billion of excess cash. After working through its near-term currency and gross margin issues, we expect the company to return towards management’s guidance of at least 10% annual revenue growth, and return to its accelerating profit growth, as longer-term we expect margins to be materially aided by rising average sales prices (from both increased pricing and a mix shift to more premium products), the company’s deep innovation pipeline, a secular shift from the company’s traditional wholesale channels to a more direct-to-consumer approach (now 35% of revenues up from 16% ten years ago), and a more streamlined supply chain. We believe that the continued global secular growth trend towards active wear will continue to aid Nike’s top-line growth, while we expect the combined gross and operating margin improvements from its initiatives will drive long-term mid-teens or higher annual EPS growth for the foreseeable future.”

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Our calculations show that NIKE, Inc. (NYSE:NKE) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. NIKE, Inc. (NYSE:NKE) was in 72 hedge fund portfolios at the end of the second quarter of 2022, compared to 67 funds in the previous quarter. NIKE, Inc. (NYSE:NKE) delivered a -12.81% return in the past 3 months.

In October 2022, we also shared another hedge fund’s views on NIKE, Inc. (NYSE:NKE) in another article. You can find other investor letters from hedge funds and prominent investors on our website hedge fund investor letters 2022 Q3 page.

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Disclosure: None. This article was originally published at Insider Monkey.

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