Jim McGovernWalmart IncWMTBUYJun 05, 2017

WMT and COST are the dominant discount retailers in the US. They became priced for perfection, with multiples of 40-50x PE for a large, mature company. Might be a great company, but that multiple's for a younger company, growing at very high rates because it can get a lot bigger. Both are in the process of compressing to a 20x PE multiple.

Either earnings are better than expected and stock trends sideways. Or earnings are worse, and multiple goes down. Either way, not much upside.

It reports Thursday. The beat every quarter, and will benefit from tariff refunds this and next quarter.

A better growth name than ATD. Take a look.

Fantastic company, but it can only grow so much. Can only grow at the rate of GDP in the US plus a bit of a pickup on how well it integrates. Trades at 40x PE (and that's after it's come down). Overvalued. You don't want to pay 40x PE for "solid" instead of growth.

They didn't have a good quarter, but are rolling back prices which should attract customers.

Was down 3.92% today and is negative for the year. It's nonsense to think that with lower gas prices that consumers won't need to drive to Walmart to save money on items. Trades at 37x PE and has fallen 26 points from its high.

It's at the 200-day moving average, which looks like support. WMT is still capturing market share. EPS growth was strong, 13% in 2025, though moderating now. The valuation got rich, but is moderating now 46x before and now below 40x.

Both great companies, but both very expensive. COST is over 50x PE, and WMT's in the 40s. Fairly low-margin model. Reliant on the consumer, and everyone's affected when that consumer is struggling.

WMT reported today. Earnings were OK, but projections on future quarters were tough. High fuel prices were highlighted.

They report Thursday. One of the greatest companies, it has been revamped into a place you want to shop at for all incomes. He expects great numbers.

Leave some $$ in your technology sleeve to allocate to one of the end users -- an industrial (TT) or big US bank (JPM or Citi) or retail/logistics (WMT or COST).

Successful transition to e-commerce is why stock's been on fire. Topline growth is only 4-5%, and his team debates this company all the time. PE is 46x earnings for 2026, extremely expensive. Seen as a safe place to park $$ as they continue to execute.

See his Top Picks.

The PE is a high 50x, but Costco is also high. It benefits from inflows into the XLP staples sector, of which 21% is Walmart and Costco. It reports Thursday. Don't reach for it here.

Consumer staples space in the US has really been all about COST. WMT has also done very well.

Wonderful business, adds a lot of value for customers. He struggles with the valuation, given its growth profile. To get a good longer-term return, you need earnings growth and multiple expansion.

WMT, as well as COST and DOL, are very defensive havens for investors. That's bid up the shares. PE ratios for the three are all north of 40x. With just a slight moderation in the PE, the overall return will still be flat. He'd be interested on a significant pullback. Be patient.