We're exiting a troubled stock after a muted quarter, while considering better options

Here is a story making headlines in the economy: Shortly after the opening bell, we will exit our position in Nike , selling 1,600 shares at roughly $41 each. Following Wednesday's trade, Jim Cramer's Charitable Trust will no longer own a position in NKE. We're moving on from Nike after another muted earnings report .

While the quarter offered some signs that management's turnaround strategy is gaining traction, progress remains slow. We were encouraged to see management become more aggressive in tackling inventory and reducing markdowns to improve gross margins. In a positive sign, the company still thinks it's just two quarters away from the business inflecting, meaning a return to year-over-year sales and earnings growth.

Economic Details

However, our concern is that when growth returns, the recovery may not be as sharp as we previously expected. We were wrong to think the company could fix the Greater China region in a timely manner, and we underappreciated the impact competition would have on Nike. The Investor Day scheduled for November could be upbeat and a potential catalyst if inventory is, in fact, clean ahead of the event.

Selling now and realizing a 40% loss is a difficult pill to swallow. But we must ask ourselves whether it is worth it to tie up capital for another four to five months in a stock that may continue to be dead money. Our answer: We would rather make this money back somewhere else and deploy these funds into other stocks with cleaner growth stories.

We plan to make a few buys later in the session with this cash. (Jim Cramer's Charitable Trust is long NKE. See here for a full list of the stocks.

Analyst Views

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Financial markets are tracking the development closely as investors assess the likely impact.