July 24, 2024
Today was a profitable day for short sellers like Creatix. As you all know, we had been shorting NVIDIA for months. We exited the position today, netting a 5% return. It is not much and we would have made significantly more buying the NVIDIA than shorting it. There were times when we were down by 40% on our short. We kept shorting every time NVIDIA hit another AI-bubble high. Today, NVIDIA had a bad day, which was a good day for us. Taking a 5% profit seemed prudent and acceptable to us. We'll see what happens in the next couple of days and we will let you know if we are back shorting NVIDIA.
Tesla also got a beating today. We don't want to talk about it because we are simply allergic to anything related to Elon Musk.
Should Warren Buffett's Berkshire Hathaway buy Nike?
We think that Warren Buffett may be beginning to pay attention to Nike in looks for striking a deal. Nike has lost almost 60% in value in the past 3 years, and it could lose another 10% - 20% this year. Buying Nike at 60% or more off sounds like a good deal for anyone with a value investing, long-term horizon.
Creatix is infinitely far from being a Berkshire Hathaway, but we began our shopping spree for Nike stock today, July 24, 2024. We have placed orders for buying Nike at $71 and below in quarter increments, all the way down to $50. That is, we placed order to buy Nike at $71, $70.75, $70.50, $70.25 ... $50. We doubt that Nike stock may get as low as $50 per share, but we'd be super happy if it does. Buy low, hold forever. Ultimately, we see Nike getting back to over $100 and doubling today's market capitalization of about $110 billion to $225 billion. It may take a decade or more, but we are not in a hurry. In the meantime, we expect Nike to continue paying good dividends and world population to continue increasing. The more feet needing shoes, the more bodies needing clothing, and the more bore humans needing sports, the better for us as future part owners of the Nike empire.
Nike is having a tough time, but is not going anywhere. Sales have declined recently in the US and worldwide. Many say that Nike has lost its "mojo". Nike's sacred cow, the Air Jordan line has turned old quickly. Many can't relate to Jordan anymore. All that may be true, but it doesn't negate the fact that Nike is an institution and the biggest footwear company in the world. Nike's balance sheet is super strong with about $11 billion in cash and about $9 billion in long term debt. Nike has a P/E ratio of 19, and a market capitalization of $110B. Nike sells about $50 billion annually.
Nike Inc. designs and sells athletic footwear, apparel, equipment, and accessories worldwide. The company was founded in 1964 and is headquartered in Beaverton, Oregon. Nike owns various trademarks that "compete" against Nike such as Converse, All Star, and One Star. Under the Nike brand license, Nike sells a line of performance equipment and accessories such as sport balls, eyewear, timepieces, digital devices, protective gear, and all sorts of equipment for sports activities. Nike also shares licensing deals with professional teams, college teams, and sport league worldwide. Nike sells its products directly to consumers (through Nike-owned retail stores and digital platforms) and also to independent distributors, licensees, and sales representatives of independent retail establishments (footwear stores; sporting goods stores; athletic specialty stores; department stores; etc.).
Nike is an "old school" business and not an AI darling as NVIDIA, Super micro, etc. The AI darlings will remain significantly more lucrative than Nike. Investors and traders can make significantly more money on AI stocks and the technology sector. Nike will be ignored for now, and the stock will be pressured further down in the coming months. Everything in business is cyclical. Eventually, Nike will see better days with increasing and more trendy sales worldwide, especially in the developing world that represents a huge market for Nike. In the past years, Nike has smartly transitioned away from manufacturing in China, moving operations to Vietnam, Indonesia, and other countries in the South Pacific. At the same time, opportunities for sales growth in China, India, Africa, South America, and the South Pacific should increase over time as the developing world keeps developing.
Nike will not make us money in the short run. For that, we continue pursuing opportunities "milking" the easy money being made on the AI boom / bubble space. However, we also want to build some discipline pursuing value investing opportunities. Call us crazy, but we think that Nike at 60% off is beginning to sound as a decent value investing proposition. That is our position. We'll see what happens. The future has not been created yet. We are creating it together.
www.creatix.one
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