Nike traded at a twelve-year low this morning.
Down 38% on the year, roughly 78% off its 2021 high, and it did not even fall on its own news. A competitor guided light and Nike went with it.
Everybody loves a bargain, and I am not touching this one. Bottom fishing is how you end up with dead money for three years while the rest of the market runs.
That does not mean I ignore beaten-up names. It means I wait for something specific before I’ll buy one.
Back in the spring there was another well-known company down about two thirds from its high, for a reason everybody agreed on at the time.
It has more than doubled since.
Something showed up in that stock in June that Nike does not have.
The company was Snowflake, and the reason everybody had for selling it was AI.
The story went that artificial intelligence would eat the software companies. Nobody needs a data platform when a model can build one for you, so why own the picks and shovels of the last cycle.
The market ran with it. Snowflake fell roughly 30% over six months while it was still growing revenue 34% and beating earnings estimates by more than 20%.
Falling on results like that is the market pricing a story.
So what got me interested, and why did it take until June?
A stock has to walk through four stages before it earns a dollar of my money, and they happen in order.
It has to get down to a 52-week low. Everything starts there, and that step alone means nothing.
Then it has to rebound off that low by a set amount. Not drift sideways, not bounce for a day. A real move up that holds, and if it drops back under that line the stock comes off my list and starts over from the beginning.
Then it has to walk into its next earnings report and get a positive reaction out of the market.
A beaten-down company that reports and gets sold again has told you the turn is not real yet.
And finally I want to see open interest accumulating in options that do not expire for a long time.
Somebody paying real money for the right to own that stock a year or more from now, in size, building steadily instead of one lottery ticket on a Friday.
Snowflake walked the whole thing.
It bottomed in April, which put it on the board and nothing more. Then it rebounded off that low and held the move instead of rolling back under it, which is where most of these names die.
Then it went into earnings and the market bought the report instead of selling it again. That’s the one that separates a real turn from a bounce.
And the long-dated open interest kept building behind it while all of that was happening.
By the middle of June the stock had cleared all four and it was 76% off the bottom. It has run better than 39% since.
The narrative broke too. UBS reiterated a buy and pointed at Snowflake’s AI revenue model as the reason. The thing that was supposed to kill the company turned out to be the argument for owning it.
Now run Nike through the same four.
It is at a 52-week low. That is stage one, and it is the only stage it has cleared.
There is no rebound to measure yet, no earnings reaction to judge, and nothing accumulating in the long-dated options that says anybody is positioning for a recovery.
None of this makes Nike a bad company.
It is a stock that has completed one quarter of a process, and buying it here means paying today for three more things that have not happened.
Right now four names have cleared all four stages.
An industrial is on there trading roughly 60% below where the data says it belongs, and so is a consumer name carrying better than 50% upside to its target.
There’s a communications company too, and a materials name that has already run far enough that my screen is flagging the entry as late.
Nike may show up on that list one day. It is nowhere close today.
If you want the tool that finds these, all four names are on it right now, with the strike, the expiration and the price target on each one.
Andrew Giovinazzi