When the markets chop around wildly and foam at the mouth while you can’t do much more than trading short-term swings while awaiting a larger opportunity to form, it’s always a good use of time to look out for stocks that might become tomorrow’s leading stocks.
I emphasize the word might, because as good as a stock can look today, in an environment like now it doesn’t take much for it all to fall apart again. Take what I write here with a large grain of salt – I am explicitly not saying right now that this stock will outperform, because it’s way too early to tell. I’m saying that it’s showing signs that it might possibly do so much further down the line. Only time will tell whether that will really materialize once the market turns, or whether it goes down the drain again with the most of the rest of entrepreneurial stocks.
This is one of the couple of stocks that recently have spiked my interest – On Shoes (on-running.com), ticker ONON. It’s a Swiss manufacturer of premium sports shoes, which fits well into the mould that often new stock winners might emerge from the most unlikely corners of the market.
Numbers are fantastic – triple-digit earnings growth backed by sky-high sales increase and margin growth (9%, 18%, 8%, 2% per quarter over the last year). It appears that the high-quality designs and materials can command price premiums and still attract many buyers, with high-profile faces like Roger Federer adding to the buzz.
Since it’s IPO in September 2021, ONON has deeply undercut its listing price and corrected more than 70% from its highest bid in November. Such a deep correction however is not necessarily faulty, given that we are deep in a hefty bear market (or what might now be characterized as a range-bound side-ways market) that has generously shaved off valuations from growth stocks.
At its last earnings report and the days after, the stock attracted sky-high buying volume which catapulted it 45% higher in a few days – 27.3 million shares were bought that day, about doubling the volume of its listing day at 13.7 million shares. This is great action suggesting institutional accumulation – all in a virile stock where $125M per day change hands, prime liquidity.
See a weekly chart of ONON here:
However, I’ll repeat myself – it is insanely early to say whether this action might finally amount to something worthwhile, and it could go backwards anytime. This is not buyable right now for anybody conscious of risk management, and I will only watch for now. The stock is extended and due for a pullback, has overhead selling pressure up the butt, needs to progress at least to the $40 or better $50 price level, and then form a constructive digestion pattern to enable a low-risk entry.
I’ll keep an eye on it, let’s see how it develops.
