NKE - Nike: Hedging For The Market And Upcoming Earnings

2024-06-26 15:56:36 ET

Summary

• The market is "top-heavy" with concentration risk, the economy is uncertain, and a high risk-free rate is not reflected in the overall market. Investors can choose to mitigate risk in multiple ways.
• Nike, Inc.'s underperformance justified by stagnant revenue and negative net income growth presents an opportunity.
• Nike's market share trends, its exposure to the economy, valuation, and its upcoming earnings support a bearish outlook, making put options an attractive risk mitigation strategy.

When reviewing the market performance of late, it is clear that it is "top-heavy" and many participants are puzzled about how long it can continue. For reasons economic, AI, liquidity, or otherwise, it is the reality we are living in. With the risk-free rate being the highest in near-term history and warning signs of an economic downturn, i nvestors can choose to diversify the risks by betting on the laggards and reducing their exposure to the mega caps or trimming the market cap-weighted index if their exposure is primarily the SPY index. ...

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