Retail Investors Get Played As Hedge Funds Bail on Tech Stocks, Nike Plunges 15% (“Just Sell It”)

It’s Friday everyone, and thank God! 

With the markets little changed yesterday combined with last night's snooze of a debate…

Who else is ready to punch their ticket into the weekend? 

(Source: Giphy) 

Now obviously before that can happen we do have one more trading session to get through…

And while there’s no clear path on which direction the markets will take today… 

Recent data has given us a dramatic change in scenery in the world of capital markets that’s clearly pointing to: Tech is dead. 

Which is why in this morning's issue we’re uncovering why Hedge Funds are calling it quits on tech stocks…

And why Nike’s new mantra this morning has shifted from “Just Do It” to “Just Sell It”. 

As always we have a lot to dive into, so without further ado…

Let’s get to it! 

Hedge Funds Call It Quits On Tech 

Well the cat is officially out of the bag my friends. While everyone was busy celebrating the massive tech rally like it was the second coming of the dot-com boom, hedge funds were pulling a fast one—dumping their tech stocks faster than Pete Davidson gets a new girlfriend. 

(Source: Bloomberg) 

Yep, you heard that right. The big dogs on Wall Street, the so-called “smart money,” have been offloading their tech shares onto the overly optimistic retail investors. Think a game of hot potato, except instead of a potato, it’s a bunch of tech stocks with massively inflated valuations - where you, me, and everyone else is left holding the disgusting potato at the end. 

(Source: X) 

You see, Goldman Sachs recently dropped the mic as they revealed that June saw the largest net dollar selling of tech stocks by hedge funds on record. For the people in the back, let me say that again: The LARGEST net dollar of selling of tech stocks on record. 

Now I don’t know about you, but that’s kind of alarming. Especially considering most of the selling has been revolving around semiconductors and semiconductor equipment stocks, which obviously have been the darlings of the year - (until they weren’t).  

This explains Nvidia’s bag of disappointments over the last week in a half. After hitting an all-time high, it saw a $430 billion drawdown in market cap over just three days. Yet, while Wall Street bets traders were trying to stay optimistic with their HODL call options…

(Source: Reddit) 

They ultimately started licking their wounds in the face of a seismic hedge fund bail out, reversing Nvidia’s year to date buying trend faster than Biden dodging questions about inflation last night.  

(Source: Giphy) 

But again, it’s not just Nvidia that got the punch in the face from Wall Street. Stocks like Broadcom and other tech heavyweights also faced the hedge fund guillotine. 

The sector saw such aggressive selling that June is now on track to be the highest month of tech stock selling that Goldman Sachs has ever recorded. Again, if that doesn’t make you double-check your portfolio, I don’t know what will.

(Source: Imgflip) 

But what about us retail investors? You know, the unsung heroes who, unfortunately, seem to always show up to the party just as the keg runs dry. Fueled by FOMO (fear of missing out), retail investors have been buying into tech stocks while Hedge funds have been shifting their focus to more “boring” sectors like banks and energy.

(Source: Barrons) 

For instance, in June, the highest volume of buying was in energy stocks, following the price of Brent crude oil as it climbed. It’s like hedge funds decided that while everyone else was betting on the next big app, they’d rather invest in the companies that keep the lights on. 

Now of course, while that could go down as a smart shift in strategy, the real question is, are hedge funds genious for getting out? Or are they complete idiots? 

(Source: Giphy) 

Well according to the numbers, the quote on quote “Smart Money” has managed to stay ahead of the curve this year, posting respectable returns even as the S&P 500 and Nasdaq Composite soared. Conventional long/short funds are up nearly 8% this year, while systematic long/short funds (which use quantitative methods) are up almost 16%. Which is nothing to sneeze at, especially when you consider the market’s overall performance.

In contrast, retail investors have been piling into tech-related funds, pushing the tech-heavy Nasdaq 100 to hit record highs. The tech sector’s weight in the S&P 500 reached 33%, its highest level in about 24 years. It’s like we’re back in the late ‘90s… and you know what happened then? Boom and bust. 

(Source: X) 

So what’s the moral of the story here? 

Well while the tech rally might still look like the golden ticket to the mass majority of the market,  hedge funds have obviously called it quits on techs. Leaving the rest of us wondering if we’ve missed the memo. 

Now of course, while Wall Street has been wrong in the past… they are most certainly on the right side of the market more times than not. And the fact that tech has experienced a sequence of faltering over the last few days, this aggressive selling does leave us wondering: Is the bubble really bursting? Or is Wall Street actually dumb like we all want them to be? 

Only time will tell, but in the meantime I’ll be checking my tech portfolio… and wondering why in the hell I read Reddit for investment advice. Sigh… 

(Source: Giphy) 

Nike: “Just Sell It”? 

So, Nike just dropped its earnings report, and let’s just say it’s looking more like an air ball than a slam dunk. As you can imagine the stock took a nosedive after their earnings miss, falling 14% in pre-market trading. Oof.

(Source: Fast Company) 

Now with that said, Nike did manage to exceed earnings estimates with adjusted earnings of $1.01 per share. That’s good right? Ehhh not really. Their sales came in at $12.6 billion, which fell short of the $12.91 billion that analysts were expecting. It’s like hitting a three-pointer but then realizing you’re still losing by 20 points. 

Annual revenue also missed the mark, coming in at $51.4 billion instead of the anticipated $51.6 billion.

As if that wasn’t already disappointing enough, Nike is also predicting a surprising revenue decline for fiscal 2025, expecting a mid-single-digit percentage drop. Analysts, on the other hand, were expecting an increase. It’s like telling everyone you’re training for a marathon but then announcing you're going to binge-watch Netflix instead. Makes no sense. 

(Source: Giphy) 

So why the decline? Well, it seems our beloved Nike is losing some of its mojo to newer brands like On  and Hoka. You know, the brands that your trendy neighbor who runs marathons is always raving about. 

(Source: Redbubble) 

Nike has been cutting overstocked brands and investing in better running shoes, with new versions of the Air Max line in the works. But still the current revenue drop is alarming to analysts and investors. 

In fact, this unexpected drop has had a ripple effect. Shares of JD Sports and Puma fell significantly, while Adidas shares saw a brief increase before plummeting again. It’s like watching a classic domino effect full of sh*t and disappointment.

(Source: Giphy) 

With that said, it’s not all bad. The company’s gross margin did rise by 110 basis points to 44.7% in the fourth quarter, thanks to some cost-saving moves. 

But that’s little comfort when your revenue numbers are slipping. Nike concluded the fiscal year with $51.4 billion in revenue, just a 1% increase from the previous year. Inventories were down 11% year-over-year, which is good, but not good enough to offset the other issues.

(Source: MakeAMeme) 

Which explains why analysts continue to be the debbie downers as Stifel’s Jim Duffy downgraded Nike from Buy to Hold, slashing the price target from $117 to $88. 

(Source: Investors.com) 

Morgan Stanley’s Alex Straton also downgraded Nike from Overweight to Equal-Weight, reducing the price target from $114 to $79. It’s like being told you’re not getting that promotion you’ve been gunning for - just like Kevin Durant realizing he couldn’t win a ring without jumping ship to the Warriors. 

(Source: Giphy) 

Ok, ok all jokes aside, despite the gloomy report, there is a small glimmer of hope for Nike. 

Some analysts believe Nike could see a recovery, especially with the Paris 2024 Olympics and a new product lineup on the horizon. Nike’s investor day in the fall could also be a catalyst. 

(Source: Shares Mag) 

The last time they had an investor day, the stock outperformed the market in the following two years. 

So, there’s still a chance for a comeback story.

But still, in the meantime, it looks like Nike will have to lace up and hit the ground running to regain its market position. While our favorite athletes continue to rep the “Just Do It” swoosh, it seems Nike’s stock could use a bit of that motivational mantra itself.

Stocks.News does not own any companies mentioned in article.