Taking a cursory glance at the Consumer Discretionary Select Sector SPDR ETF (XLY), it becomes evident that this group has not fared as well as the broader market indices. However, the narrative is not so straightforward. Industry titans such as Tesla, Nike, McDonald’s, and Starbucks have significantly contributed to the sector’s underperformance, attributed more to company and industry-specific headwinds rather than a broad-based slowdown in consumer demand. A deeper excavation into the landscape of consumer discretionary firms, particularly those beneath the large-cap umbrella, reveals a vibrant ecosystem bustling with innovation, market share expansion, and earnings growth. This suggests not only sustained consumer spending but also evolving preferences and trends that are reshaping the sector.
Among the constellation of companies demonstrating remarkable dynamism and strength is Sharkninja (SN), a prodigious entity in the realm of household durable goods. Having entered the market just a year ago, SharkNinja has swiftly ascended to new heights, carving a niche for itself within the consumer discretionary domain. Within the investment circles at Inside Edge Capital, we’ve recently incorporated SharkNinja into our portfolio, swayed by its compelling growth trajectory and market resilience.
To contextualize Sharkninja’s prowess and industry positioning, it’s pivotal to examine the household durables sector, an integral component of the consumer discretionary segment. Relative Rotation Graphs (RRGs) comparing the consumer discretionary ETF and household durables sector to the S&P 500 since June 1st of this year reveal enlightening trends. Both sectors exhibit arrows pointing upwards and to the right, indicative of escalating relative strength and momentum in comparison to the benchmark S&P 500 index. This trajectory unambiguously places household durables in the lead, outperforming the broader consumer discretionary sector—a testament validated by a remarkable 18.92% increase versus a 5.39% and 5.88% return for the S&P 500 and consumer discretionary sectors, respectively, over the same period. Incorporating Sharkninja into the RRG elevates this narrative, positioning it significantly further to the right, heralding unmatched relative strength amidst its peers and against the encompassing sectors.
At its core, Sharkninja operates through two distinct segments: ‘Shark’ and ‘Ninja’. These divisions have been pivotal in pioneering consumer products that resonate with the changing preferences and needs of the modern household. From vacuums to cooking appliances, air fryers, blenders, ice cream makers, food preparation gadgets, to coolers, Sharkninja’s product suite is both diverse and innovative. The company’s strategic emphasis on secure supply chains and high-margin offerings has been instrumental in fueling revenue growth and margin expansion.
A momentous breakout was observed in August following an impressive Q2 earnings announcement, which surpassed expectations. The reported earnings of $0.71 per share beat the forecasted $0.60 by a commendable 19%, showcasing a 51% growth compared to the previous year. Revenue figures followed suit, boasting a 31% increase to $1.25 billion year-on-year, outperforming consensus estimates by 14%. Post-earnings, the stock witnessed a period of consolidation, trading in a tight range around the $90.00 mark, before breaking out above the $92.50 resistance level on significantly high volume.
Inside Edge Capital’s decision to incorporate Sharkninja into our growth portfolio on August 24th, 2024, with a 1% allocation, was not only a testament to our conviction in the company’s prospects but also influenced by anticipatory positional adjustments for an upward trajectory, buoyed by upgraded price targets from Bank of America and Goldman Sachs.
Conclusively, amid a landscape muddied by economic uncertainties and market volatilities, Sharkninja emerges as a beacon of innovation, resilience, and growth. Its journey from a nascent market entrant to a dominant force in the household durables sector encapsulates the essence of strategic foresight, operational efficiency, and market agility. As we stand at the cusp of potential economic downturns, stories like that of Sharkninja serve as compelling narratives that not only challenge the prevailing pessimism but also inspire confidence in the inherent dynamism and resilience of consumer markets.
For those keen on exploring further into the realm of financial trends and market insights, DeFi Daily News offers a treasure trove of information that could enrich your understanding and perspectives on the evolving economic landscape.
DISCLOSURES: Todd Gordon, the founder of Inside Edge Capital, LLC, holds personal and wealth management investments in SharkNinja. The opinions expressed herein are solely those of the CNBC Pro contributors and do not reflect the views of CNBC, NBC UNIVERSAL, or its affiliates. This article is for informational purposes only and does not constitute financial, investment, tax, or legal advice. Prior to making any financial decisions, individuals should consider their personal circumstances and consult with a financial advisor.
