DICK'S Sporting Goods (DKS) Invested in Foot Locker Amid Market Skepticism

Alluvium Asset Management, an asset management company, released its “Conventum – Alluvium Global Fund” second-quarter 2025 investor letter. A copy of the letter can be downloaded here. It appears that the market continues to rise on news of new tariff deals. In the quarter, the Fund was up 8.5% in USD terms, 3.1% in AUD terms, but down 0.1% in EUR terms. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its second-quarter 2025 investor letter, Conventum – Alluvium Global Fund highlighted stocks such as DICK’S Sporting Goods, Inc. (NYSE:DKS). DICK’S Sporting Goods, Inc. (NYSE:DKS) is an omni-channel sporting goods retailer. The one-month return of DICK’S Sporting Goods, Inc. (NYSE:DKS) was 1.69%, and its shares lost 8.50% of their value over the last 52 weeks. On August 28, 2025, DICK’S Sporting Goods, Inc. (NYSE:DKS) stock closed at $215.08 per share, with a market capitalization of $17.226 billion.

Conventum – Alluvium Global Fund stated the following regarding DICK’S Sporting Goods, Inc. (NYSE:DKS) in its second quarter 2025 investor letter:

"The big news came from the management team of one of the Fund’s largest investments. DICK’S Sporting Goods, Inc. (NYSE:DKS) (down 1.2%) announced its USD 2.5b acquisition of Foot Locker, the mammoth sports footwear retailer with 3,266 stores globally. The claimed rationale was as usual; earnings accretion (but does this come with extra risk); and cost synergies (in the medium term). Ordinarily we would be extremely skeptical, but with Dick’s management team having been conservative and consistently delivering above expectations over the last 7 years, we are only mildly skeptical. Foot Locker has appeared on our radar in the past. Its share price had fallen from the low to mid $20’s late last year to $12.87 at the time of Dick’s $24.00 offer (which was cash with option of scrip). Given this perspective, the “premium” paid is perhaps not so high as it appears. And in any case, of far more relevance, the acquisition multiple is a reasonable 6.1 times adjusted 2024 EBITDA. On the same day, Dick’s announced preliminary first quarter results which were inline with our expectations. Not unexpectedly, the market was more than mildly skeptical about the merger and Dick’s was down 14.6%. Intuition was telling us that, whilst the direction of market movement was appropriate, the extent of it was a little too drastic. We bought more. Not long later Dick’s reported official first quarter results and re-affirmed its guidance. We made some minor tweaks to our numbers. On our analysis this business is generating returns on total capital in the high 30% range, and trades at an owner’s earnings yield of 6.5%. We are happy to maintain our 6.8% position."

DICK’S Sporting Goods, Inc. (NYSE:DKS) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 55 hedge fund portfolios held DICK’S Sporting Goods, Inc. (NYSE:DKS) at the end of the second quarter, which was 44 in the previous quarter. While we acknowledge the potential of DICK’S Sporting Goods, Inc. (NYSE:DKS) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In another article, we covered DICK’S Sporting Goods, Inc. (NYSE:DKS) and shared the list of most undervalued quality stocks to buy according to hedge funds. In addition, please check out our hedge fund investor letters Q2 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.