Billionaire investors buy Nike. Should you follow them?

NIKE (NKE 0.77%) is one of the best performing consumer goods stocks of all time. The stock has risen more than 46,000% since the company’s initial public offering in 1980 and would have turned a $1,000 investment into more than $767,120 in that time (with dividends reinvested).

More recently, Nike shares have struggled, falling more than 52% from their mid-2021 peak. Growth has slowed, even turning negative recently, as the athletic shoe and apparel maker has lost market share to some younger rivals such as On Holding and DeckersHoka brand. Its strategic shift to the direct-to-consumer channel, which came along with an underinvestment in brand marketing, now appears to be backfiring.

While Nike’s struggles are evident, some investors are exploring the opportunity that comes with the sale of a longtime industry leader. Let’s take a look at some of the billionaire investors who just picked up Nike stock at a discount.

Image source: Nike.

Bill Ackman’s Pershing Square Capital Management is buying

Bill Ackman is one of the best-known hedge fund managers on Wall Street. Once called “Baby Buffett,” Ackman went on to great lengths Chipotle when the stock was still reeling from the E. coli crisis. He also bought hedges shortly before the outbreak of the COVID-19 pandemic that generated 100 times their profit, turning $27 million into $2.6 billion and protecting his portfolio in this process.

Ackman tends to hold only a handful of stocks at a time, unlike most of his billionaire investors. This means they prefer a concentrated portfolio of high conviction stocks over a broad and diversified portfolio.

So it was notable when Ackman’s Pershing Square fund reported that it had taken a stake in Nike in the second quarter, buying 3.04 million shares of the stock, which is worth about $2.5 billion today.

It’s not clear why Ackman bought Nike, but he may see potential for a turnaround similar to what he saw in Chipotle, as Nike is a strong brand that appears temporarily damaged. New management could help refresh the company, much like what happened with Chipotle. Investors were pleased with Ackman’s decision to take a bet, as Nike shares jumped on the news.

Jeff Yass’s Susquehanna takes a stake in Nike

Another buyer of Nike in the second quarter was Jeff Yass’s Susquehanna International Group. This proprietary global trading firm made Yass a billionaire with the help of an early investment in the Chinese company Bytedanceparent TikTok, of which it owns a 15% stake. The company is also known for its quantitative approach to investing.

Among the stocks it bought in the second quarter was Nike. Susquehanna added more than 5.4 million shares of Nike during the quarter, bringing its stake to 6.1 million, or about $500 million worth of Nike.

It’s not clear why Yass’s firm bought Nike stock, but like Ackman, he likely sees the knocked-down stock as a good value play right now.

Ken Griffin Citadel Advisors

Ken Griffin’s Citadel, which is known as the most profitable hedge fund company of all time, also added to its Nike portfolio in the second quarter. Citadel added 1.1 million shares to its Nike holdings, bringing it to 3.2 million, or about $250 million.

Citadel has historically favored a quantitative and diversified approach, using technology and algorithmic investing to identify trading opportunities. The company has thousands of investments, so it is unlikely to comment on the Nike holding as it is only a small part of its broad portfolio.

Should You Buy Nike Stock?

There are no signs of recovery in Nike’s business yet, so investing right now might be premature. However, interest from top billionaire investors indicates that the price may have fallen enough to risk the stock.

Nike is still targeting a decline in revenue for the fiscal year, and it’s clear there are structural issues in the business that need to be fixed. I own some shares, but I would like to see some significant improvement in the business before I buy more shares.

That being said, I think Nike should recover eventually. Its brand recognition and marketing reach is unmatched, as is its roster of athletes. It may take a new management team to get the company back on track, but in the long run, Nike should put its current challenges behind it and return to growth.