Three Buys and a Bail: Nike, Boeing, Starbucks, and 3M

We'll start with Nike, down 20% this year, up 6% since saying Elliot Hill will return as CEO next month. He's got big pressure from HOKA on and innovation challenges in the Jordan and Dunk brands, but this is a buy for you. It is, and ultimately it's the multiple you want to pay on Nike. What is it? It's certainly post-COVID has been 30, 30 plus, pre-COVID it was probably 25 to 27. It's closer to 25 right now. I don't think you're doing it on a value dynamic. In fact, I think you're not going to see an inflection in EPS until 27 probably, but I think Elliot Hill is the right guy, the back of the future here. I think people are probably a bit off on how much innovation is needed here at Nike. I think it is a marketing turnaround. It is about getting behind the brand. I do think that they're still the number one global athletic brand by far. So I think for investors that are somewhat patient here, because I don't think the turnaround is immediate. I think that investor day in November is something that actually you probably get a bit of a reset. And I think that's your opportunity. Oh, so when it goes down, if they announce some big changes, I am curious as we go through these, Tim, which ones you think will be the quickest to turn around? The next one is Boeing, which is down 5% since Kelly Ortberg took the helm in August. They had the door plug blowout, space capsule issues, the 30,000 workers strike, all of this on his plate. He also just ousted the head of space and defense. But you still would be a buyer here. Again, I don't know, at this point, people are saying it might be a multi-year turnaround story. Yeah. Well, I think it is precise. It should be noted. I'm long all of these stocks at different points here. I'm long Boeing from $50 to $70 higher per share. I'm not happy with what's going on. There's a credit issue right now. I think the company's doing everything they can to maintain the current credit quality. And I think the dynamic of free cash flow is maybe $15 per share of free cash flow by 26. I think it's not late 25 anymore. But I do think that some of the union negotiations, there are a lot of headlines that are probably intended just for that. I think this is not the quickest turnaround, although I think this is the story that I actually have the most long-term confidence in the value here. Interesting. I love the hint. You know, the worse that they do right now, maybe the better that that helps the company in those negotiations. Although, as we know, they're facing a very tough battle. And, you know, some of the other recent wage negotiations indicate that as well. Let's move along to Starbucks, which now has former Chipotle chief Brian Nickell in the driver's seat. And the shares are up 4% since then, but they're still negative on the year. Now, he wants to make the store experience smoother, but they also have some demand pressures, especially overseas. Big questions about what's going to happen with the China unit. But you're a buyer or an owner, I should say. Yeah. And both. I mean, I think for me, it's been a trade where I've lightened up exposure over the last six to nine months. I think Brian Nickell is looking to turn things around faster than people think. I think ultimately people understand he is someone that will support this premium brand. This is kind of that turnaround he inherited at CMG in 2018. I think at Starbucks, it's not broken. I think the chaos in the stores is a dynamic that is slowly being fixed. I think that the macro headwinds on discretionary and some pricing pressure and margin pressures are things that don't also change under a new CEO immediately. But this is a story that I think actually still has room to run. And I think this is a name that I think on valuation is kind of in the middle of the five year range. But I think the turnaround plan here, I think this one is less broken, frankly. And I think there's maybe more play to work with for that. All right. Those are your three buys in the CEO kind of turnaround space. The bail is actually 3M, which is up 40 percent since Bill Brown became CEO back in May. They do have a forever chemical litigation spitting off the health care business. Shares are well off their all time highs. Why are you bailing? Well, I just think this is a valuation story after a 70 percent move from March and probably over 90 percent over the last year. This is valuation. I mean, in a base case scenario, you're probably at 13 times, which is real cheap. If you're looking for some of the catalysts on spinoffs, I think some of those are in the price. I think some of the dynamics in terms of just efficiencies and margin improvement are in the price. It's like it's a case of a CEO that made a major change. It's about where there was a shakeup and there really was a catalyst to unlocking some of the value here. But this is you've had a great run. Why wouldn't you take some profits here? No, I think look in the Ford is now about 18. So if there's some mean reversion there, then certainly watch out. But again, he might be a template. And I don't know if you can apply it industry wise, but certainly for the success of leadership and one of these big turnaround changes. OK, so we have to talk Intel. You're here. You chose it as your special boot on Friday saying it's time for Pat Gelsinger to go. The shares are down 64 percent since he became CEO. But now we have deal chatter. So what do you make of it? Well, that's fine. The deal chatter is a function of just how much of a horror story this has been in terms of also the underlying assets where you've actually had a case where look for Qualcomm, they need diversification. They've been looking for deals. I don't know that this is the deal that can get done. I think it does get done. There's certainly dilution for Qualcomm and a lot of regulatory hurdles. But but a three year honeymoon is not a honeymoon. I mean, Pat Gelsinger has overseen not only balance sheet slippage, but real innovation slippage. The technology gap here is is extraordinary. I think over the medium to long term, investors are going to be rewarded at Intel. I think there's a lot of questions in terms of even look at the the Apollo, at least headlines from Friday. This is also an equity partner who's already invested in the Ireland essentially entity and owns 49 percent of that with 11 billion infusion. The company needs cash. And the turnaround in the short to medium term is the question is, what's the trade off on CapEx, which we all know is something that we need.