We’re buying the post-earnings slump in a stock alongside Tim Cook. It’s not Apple
We buy 200 shares of Nike at about $59. Following Wednesday’s trading, Jim Cramer’s Charitable Trust will own 1,600 shares of NKE, increasing its weighting to 2.4%. 2.08%. Following a reassuring signal from the board, we’re gathering shares of struggling Nike to gather information that a bottom could be forming. Late Tuesday evening, we learned that board member and Apple CEO Tim Cook purchased nearly $3 million worth of Nike stock on Monday at an average price of $58.97. The acquisition was made alongside that of Nike director and former Intel CEO Bob Swan, who raised nearly $500,000 worth of shares on Monday. While there are many reasons to sell, insider buying signals that people close to the company think the stock is undervalued. In August, insider buying by Eli Lilly CEO David Ricks helped Club shares bottom out and begin a recovery. Earlier this month, an insider buyout from Linde helped stabilize the Club name. These acquisitions from Cook and Swan have the potential to do the same for Nike. Nike rose more than 3% on Wednesday; It has fallen sharply since the sneaker and apparel giant reported mixed earnings late Thursday. Shares lost 10.5 percent on Friday and 2.5 percent on Monday. We believed this was an overreaction. The stock closed slightly higher on Tuesday. As for the reported quarter, there were some positives and negatives. The company beat analyst expectations on both revenue and earnings per share, driven by a strong recovery in its North American operations. Additionally, stocks in Europe, the Middle East and Africa as well as the region are in a healthy and clean position, meaning margins will increase in future quarters due to more full-price sales. But fixing China has proven to be a more complex task than expected, requiring the administration to completely reset its approach to the region to break the cycle of discounts and promotions. We don’t expect a turnaround in China in the next few quarters, but we believe CEO Elliott Hill and his team will get this right. Their top priorities were to become more sports-focused and clean up their US operations, and now that that part of the business is on a more resilient path they can focus more attention on developing China. Returns are never simple, but we agree with management that this one was mid-innings. There’s still a lot of work to be done, but Hill can draw from the North American playbook to succeed again in China. (Jim Cramer’s Charitable Trust is long NKE, AAPL, LLY, LIN. See here for a full list of stocks.) When you subscribe to the CNBC Investment Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trading alert before buying or selling a stock in his charitable foundation’s portfolio. If Jim talked about a stock on CNBC TV, he would wait 72 hours after issuing the trading alert before executing the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, TOGETHER WITH THE DISCLAIMERS. NO CIVIL OBLIGATIONS OR DUTIES EXIST OR SHALL BE RESULTING FROM YOUR RECEIVING ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO SPECIFIC RESULT OR PROFIT CAN BE GUARANTEED.
