Market Overview - U.S. equities showed resilient but volatile performance in Q4, with major indexes near all-time highs while market conditions shifted significantly beneath the surface [2] - The S&P 500 Index returned 2.7% during the quarter, while the Russell Midcap Growth Index declined 3.7%, indicating increased selectivity among investors [3] Performance Analysis - The ClearBridge Growth Strategy outperformed its benchmark for the third consecutive quarter, benefiting from early-quarter momentum in AI-related sectors and strong downside protection as risk appetite moderated [4] - The Strategy delivered a strong year, outperforming its benchmark by nearly 600 basis points (gross of fees), highlighting the importance of stock selection in a market where much of the upside is already priced in [6] Sector Contributions - Positive contributions came from the consumer discretionary and materials sectors, while the consumer staples and information technology sectors detracted from performance [20] - Notable contributors included Vertex Pharmaceuticals, Broadcom, Freeport-McMoRan, and TE Connectivity, while detractors included e.l.f. Beauty and Doximity [22] Portfolio Positioning - The Strategy reallocated capital towards opportunities with more attractive risk-reward profiles, including new positions in Vistra, Alnylam Pharmaceuticals, and Hilton [14] - The portfolio is more diversified across sectors and subsectors, improving resilience while maintaining the ability to capture long-term upside [7] Outlook - The outlook remains consistent with earlier assessments, emphasizing the importance of disciplined stock selection and a balanced approach to portfolio construction amid increased volatility [17] - AI continues to represent a long-term opportunity, with a focus on maintaining exposure within the AI complex while balancing offensive and defensive characteristics in the portfolio [18]

Core Insights - ClearBridge Investments reported a strong but volatile performance in US equities for Q4 2025, with the S&P 500 Index returning 2.7% and the Russell Midcap Growth Index declining 3.7% [1] - The ClearBridge Growth Strategy achieved its third consecutive quarter of outperformance through a balanced and highly active share approach, maintaining disciplined portfolio management and opportunistic capital allocation [1] Company Highlights - On Holding AG (NYSE:ONON) is a Swiss athletic company that develops and distributes sports products, with a one-month return of 2.78% and a 52-week loss of 11.30% [2] - As of January 9, 2026, On Holding AG's stock closed at $49.12 per share, with a market capitalization of $16.218 billion [2] - The ClearBridge Growth Strategy noted that On Holding AG contributed positively to consumer performance, benefiting from strong growth in international markets, particularly in China, and accelerating growth in apparel [3] Hedge Fund Activity - On Holding AG was held by 52 hedge fund portfolios at the end of Q3 2025, an increase from 42 in the previous quarter, indicating growing interest among institutional investors [4] - Despite the potential of On Holding AG, some analysts believe that certain AI stocks may offer greater upside potential and carry less downside risk [4] Investment Position - ClearBridge Growth Strategy initiated a position in On Holding AG in the previous quarter, reflecting confidence in the company's growth prospects [5]

Group 1: Nike's Performance and Strategy - Nike is currently facing notable obstacles in its comeback efforts, with the company stating it is "in the middle innings" of its turnaround [2] - The fiscal year 2026 is focused on right-sizing the classics business, enhancing the digital experience, diversifying the product portfolio, and strengthening consumer and partner relationships [3] - Significant challenges remain in turning around Nike's Converse and Greater China business units, although the company's stock received a boost from insider purchases by executives [4][5] Group 2: Adidas' Progress and Goals - Adidas CEO Bjørn Gulden has nearly achieved the goals of his initial four-year plan one year ahead of schedule, following financial struggles due to a canceled collaboration with Kanye West [6] - The target for Adidas is to become a "healthy company" by 2026, indicating a focus on financial stability and growth [6]

Market Overview - U.S. stock markets closed for New Year's Day on January 1, 2026, with no trading activity, leading to cautious investor sentiment following a strong 2025 [1] - Futures markets indicated a slight decline, with S&P 500 futures down 0.2%, Dow Jones futures down 0.1%, and Nasdaq futures down 0.3% as of December 31, 2025 [2] 2025 Market Performance - Major U.S. stock indexes closed lower on December 31, 2025, with the Nasdaq Composite down 0.8%, S&P 500 down 0.7%, and Dow Jones down 0.6%, marking a modest pullback [3] - Despite the late-year dip, 2025 was a strong year for Wall Street, with the Nasdaq gaining approximately 20%, S&P 500 rising roughly 16%, and Dow Jones climbing about 13% [4] - Notable performers included Micron Technology with a 239% increase, Palantir up 135%, AMD gaining 77%, Alphabet rising 65%, and Nvidia increasing by 39% [4] Upcoming Economic Data - Key economic data releases include U.S. Construction Spending for November on January 2, ISM Manufacturing Index for December on January 5, ADP Employment Report and ISM Non-Manufacturing Composite on January 7, and U.S. Employment Report on January 9 [6] Company Developments - NIO Inc. reported record deliveries of 48,135 vehicles in December, a 54.6% year-over-year increase, and total deliveries for 2025 reached 326,028 vehicles, up 46.9% [11] - Trump Media & Technology Group announced a partnership with a cryptocurrency exchange, resulting in a 5% share price increase [11] - Nike shares advanced 4.1% after its CEO purchased approximately $1 million worth of shares [11] - Disney entered a partnership with OpenAI, becoming the first major content licensing partner for Sora, and made a $1 billion equity investment in OpenAI [11] - Micron Technology's shares declined by 2.5% despite strong annual performance [11]

Core Insights - Heavy insider buying by top executives and directors at Nike signals potential confidence in the company's turnaround efforts as Wall Street reassesses its future [3][6] - Nike's stock price increased by 4.12% to close at $63.71, with trading volume significantly above its three-month average, indicating heightened investor interest [2][6] - Despite a challenging year with a nearly 16% decline in 2025, Nike's stock has seen an 11% increase in the past five days, reflecting a positive shift in market sentiment [6] Company Performance - Nike's market capitalization stands at $90 billion, with a gross margin of 41.98% and a dividend yield of 2.63% [2] - The company's stock has experienced a significant growth of 35,355% since its IPO in 1980, showcasing its long-term value creation [3] - CEO Elliott Hill increased his stake by over 7% in a transaction exceeding $1 million, while board member Tim Cook purchased around $3 million worth of shares, further indicating confidence in the company's direction [6][7] Industry Context - The athletic footwear and apparel industry is facing challenges, with competitors like Adidas and Puma experiencing slight declines amid tariff and demand pressures [5] - Analyst sentiment towards Nike remains mixed, although Guggenheim has reiterated a Buy rating, suggesting some analysts see potential in the company's strategy [7]

Company Overview - Nike has faced challenges in rebuilding investor trust after disappointing quarterly performances, with shares down over 26% from their 52-week high [1] - The company operates a mixed business model, selling through wholesale partners and direct-to-consumer channels, including digital platforms [5] Recent Developments - Apple CEO Tim Cook, who has been Nike's lead independent director since 2016, purchased 50,000 Class B shares at an average price of $58.97, totaling $2.95 million, nearly doubling his stake to approximately 105,000 shares [2] - Following Cook's purchase, Nike's stock reacted positively, jumping between 2% and 5% in premarket and early regular-session trading [3] Market Context - The global footwear market is projected to generate around $500 billion in revenue in 2025, with an annual growth rate of 5.52% through 2030, indicating a demand for shoes despite Nike's execution issues [3] Financial Performance - Over the past 52 weeks, Nike's shares have slipped 19%, with a 13% decline in the past three months, although there has been a recent uptick of 6% in the last five trading days [5] - Nike currently trades at a forward P/E of 38.16x, significantly higher than the consumer discretionary sector average of 17.83x, suggesting the market views Nike as a higher-quality stock with stronger long-term potential [6] - The company has a consistent dividend yield of 1.61%, with the most recent dividend being $0.41 per share, and has raised its payout for 23 consecutive years, although a high forward payout ratio of 93.69% indicates limited room for significant increases [6]

Core Insights - Athletic brands like Nike and Adidas face significant digital performance challenges, with a notable gap between their metrics and customer experiences online [1][2][3] Digital Experience Scores - Catchpoint's Digital Experience Score ranges from 0 to 100, measuring customer experience across various factors including device performance, network quality, and application load times [3] - Smaller brands such as Fila, Under Armour, and New Balance outperform Nike and Adidas in digital experience, with Nike ranking 16th and Adidas 11th among 20 brands [4] Downtime and Financial Impact - Adidas has an uptime rate of 92.4%, resulting in approximately 56 hours of downtime monthly, equating to potential losses of up to $19 million monthly or $225 million annually [5] - Nike's site availability is at 92.9%, leading to about 51 hours of downtime per month, which could result in losses of $17 million monthly and over $200 million annually [6] Advertising and Investment - Nike invested $4.3 billion in advertising for Fiscal Year 2024, but Catchpoint suggests reallocating some of this budget towards improving site speed and stability to enhance ROI [7] Performance Rankings - The top brands scored between 90 to 100, with Fila (96), Under Armour (95), and New Balance (91) leading the pack, while Nike (53) and Adidas (58) are categorized as "challenged" [8][9] - Only three brands load pages in under 3 seconds, with the median load time being 6.6 seconds; Nike's load time is 6.70 seconds [11] Market Dynamics - The Digital Experience Scores correlate with market performance, as evidenced by Nike losing $28 billion in market value while competitors like On Running grew by 40% year-over-year [10] - In an economy driven by instant gratification, speed is identified as a critical competitive advantage for brands [12] Monitoring and Data Collection - The data was collected from 123 global monitoring locations, ensuring a comprehensive evaluation of the brands' digital performance [13] Company Performance - Nike's recent first-quarter results exceeded Wall Street expectations, indicating progress in its digital strategy, although challenges remain in its China business and digital operations [14] - Saucony's parent company reported a 41.5% increase in net sales, reflecting a strong growth strategy, while Hoka's sales rose by 19.8%, contributing to Deckers Brands' overall growth [15][16]

Core Viewpoint - Deckers' stock performance has been weak, remaining only about 5% above its 52-week lows, indicating a bearish market sentiment unless a rebound occurs [1] - The consumer discretionary sector is experiencing general weakness, impacting Deckers and its competitors [1] Company Analysis: Deckers - Deckers is positioned for potential growth due to its strong HOKA brand and solid financial health, which may allow it to outperform competitors like Nike [4][5] - Despite a nearly 50% decline in stock price year-to-date, Deckers maintains a strong balance sheet, enabling aggressive share repurchases and operational flexibility [6] - Deckers' valuation metrics are attractive, with a trailing P/E of 17.2 and a forward P/E of 17.6, significantly lower than Nike [6] - The enterprise value-to-sales ratio of Deckers is just over 2.5, close to Nike's, despite better growth prospects, indicating relative undervaluation [7] - Seasonal demand for UGGs may provide a tailwind for Deckers, with potential for a 20-30% rally by December 2025 if consumer spending stabilizes [7] Company Analysis: Nike - Nike is facing significant challenges, including a 12% revenue decline in Q4 2025, attributed to inventory issues and weakening demand in key markets [8] - The company's stock has dropped nearly 60% from its 2021 highs, reflecting lost market share to competitors like HOKA and Lululemon [9] - Nike's innovation stagnation and flawed direct-to-consumer strategy have negatively impacted brand desirability among younger consumers [9] - The company is estimating over $1 billion in additional costs from tariffs, further straining its EBITDA margins, which are currently around 14% [10] Trade Strategy - A pairs trade strategy is proposed, taking a long position in Deckers and a short position in Nike to capitalize on diverging fundamentals within the athletic footwear sector [3][12] - This strategy aims to neutralize broader market risks while leveraging Deckers' superior growth rates and lower P/E multiple compared to Nike [13] - Even if Deckers' net income margins were halved, it would still trade at a similar multiple to Nike, highlighting its better growth potential [13]

Core Viewpoint - The competition in the athletic footwear market is intensifying, with NIKE and Deckers Outdoor Corporation as key players, raising questions about which stock offers better upside potential in the near term [1] NIKE Overview - NIKE maintains a strong position in the athletic footwear and apparel market, bolstered by brand equity, marketing partnerships, and a global distribution network [2] - The company is implementing a "Win Now" strategy to address macroeconomic challenges, focusing on rebalancing wholesale partnerships, accelerating innovation, and improving inventory management to stabilize performance in fiscal 2025 and enhance growth in fiscal 2026 [3][4] - NIKE is committed to innovation, introducing the "Speed Lane" development model to adapt quickly to consumer trends and launching new franchises in the second half of fiscal 2025 [5] - Despite a cautious outlook for fiscal Q4 2025, with expected revenue decline and gross margin contraction, NIKE's strong fundamentals and proactive leadership position it as a long-term investment opportunity [6] Deckers Overview - Deckers is experiencing growth driven by its flagship brands, UGG and HOKA, with UGG leading in the premium lifestyle footwear market and HOKA gaining traction in high-performance segments [7] - Innovation is central to Deckers' strategy, with new product launches for HOKA and expansion of UGG's offerings beyond winter styles, aligning with consumer preferences [8] - International expansion is a key focus, particularly in markets like China, alongside a growing direct-to-consumer segment supported by omnichannel investments [9] - However, Deckers faces challenges such as inventory availability issues for UGG, which may impact sales in the fourth quarter [10] Financial Estimates - The Zacks Consensus Estimate for NIKE's fiscal 2025 sales and EPS indicates a year-over-year decline of 10.7% and 45.6%, respectively, with a recent 5.4% increase in EPS estimates [11] - In contrast, Deckers' fiscal 2025 sales and EPS estimates suggest year-over-year growth of 15.4% and 21.2%, respectively, with a slight 0.2% increase in EPS estimates recently [11] Stock Performance - Over the past six months, DECK shares have dropped by 30%, while NKE stock has declined by 17.3%, with NIKE showing more resilience amid broader market pressures [12] Valuation Comparison - NIKE's forward price-to-sales (P/S) multiple is 2.03, below its three-year median of 2.84, indicating potential value for investors [15] - Deckers is trading at a forward P/S multiple of 3.53, above its median of 3.47, suggesting it may be pricier compared to NIKE [15][16] Investment Outlook - NIKE is viewed as a stronger investment candidate due to its proactive growth strategies, focus on performance categories, and operational discipline, positioning it for renewed momentum [17] - While Deckers benefits from brand momentum and direct-to-consumer growth, it faces challenges that could impact investor sentiment, making NIKE's scale and execution a clearer path to long-term value [18]

Group 1: Q1 Earnings Overview - The Q1 reporting cycle is not fully underway, with major banks set to report on April 11, but early results from companies with fiscal quarters ending in February show mixed outcomes [1][2] - As of March 21, 14 S&P 500 members have reported February-quarter results, with another five expected to report soon, leading to nearly two dozen results by the time major banks report [2] - Current expectations for Q1 earnings indicate a year-over-year increase of +5.9% on +3.8% higher revenues, following a previous period of +13.8% earnings growth [8][18] Group 2: Company-Specific Performance - Nike's quarterly results initially led to a stock price increase, but investors later realized ongoing recovery challenges, resulting in a loss of gains [3][4] - FedEx reported disappointing results, missing both top and bottom-line expectations, and provided a lower guidance for the third consecutive quarter, indicating ongoing company-specific issues [4] - Lululemon's stock performance has been closely tied to consumer spending trends, with its shares down -15.6% year-to-date, compared to a -4.2% decline for the S&P 500 [12] Group 3: Market Sentiment and Economic Outlook - The market has shown a lack of enthusiasm for early Q1 results, with the percentage of companies beating EPS estimates at the lowest level in the past 20 quarters [13][17] - There has been a significant number of negative revisions to Q1 earnings estimates across various sectors, with the most notable declines in Conglomerates, Autos, and Consumer Discretionary [21][22] - Despite near-term risks, the overall corporate earnings picture has been improving, with expectations for continued growth momentum through 2027 [27][29]