Walmart Inc (WMT)

Retailers are doing well and enjoying the consumer discretionary rally. Pair a Walmart position with Amazon. They both dominate retail.

He likes the name. They just bought it as it dipped down with softer earnings. Trading at 17 forward earnings. There are other retailer names that he likes better. They are the lower price leader. Some movement to the upside but he wouldn’t hold it for a very long-term period.

Bank of America BAC-N or Walmart WMT-N. Prefers BOA. Their regulatory, merger and interest rate issues are now lifting. Wealth management operations through Merrill Lynch is growing fast. Capital markets are reasonably healthy.

(A Top Pick April 10/17 - Up 43.5%) A good name. Still in a good trend. A little extended here. It is getting parabolic. Yet still looks pretty good.

They improved results with an initiative started in 2015 to increase wages and invest in technology. The problem now is that the price of the stock has run up too much. Easy gains have been made now.

Stock price has done well, in the face of the disruption from Amazon. Has done many innovative things, including purchase pickup and even using Lyft and Uber for home delivery of groceries. Has done a great job of executing the acquisition of jet.com. Two things to consider before buying Walmart today. The share price has risen 50% over the past year. It trades at about 23 times earnings with a reasonable dividend. There is no rush to buy it but no need to wait until it trades at a deep discount. Second, they are investing heavily renovate their stores. This capex will put pressure on their ability to raise their dividend. Would not be a buyer here but he likes the name.

This has done very well, and that’s on the back that it has been competing and executing relatively well on the e-commerce side Amazon (AMZN-Q). This has come a long way since the 2000-2010 period, when it went nowhere. They just hit a new all-time high today, trading at 22X forward earnings at the high end of the 10-year historical average. He is looking for a 5%-6% long-term growth rate in terms of EPS, and that might inch higher, if they execute on the e-commerce side. Pays a 1.9% dividend yield. The long-term growth is on the International side, which is 24%-25% of its revenue base. He doesn't know if the international side is going to reach the same level of profitability that we see in the US, given that they don't have the same scale as they do in the US and Canada. This is a bit expensive, and he would prefer something like Costco (COST-Q), as he thinks they are ramping up their e-commerce area as well, and have good same-store sales.

This company has responded very well to the Amazon threat. They acquired jet.com, an online retailer, and they are taking on Amazon. A retailer, but it’s also a grocer in that more than 50% of revenues come from groceries, very, very low margin commodities.

A traditional brick-and-mortar retail. If there is any retailer that can put up a half decent fight against Amazon, it is this company. The valuation looks pretty reasonable, and there is some decent earnings growth, if they can capitalize on this online earnings spend. It also gives you some global exposure. Pays a nice dividend.

It is a two horse race on the retail side in the US with AMZN-Q. WMT-N has the bricks and mortar in place and it is easier to build out that online. Their web site has become far more compelling. It has crept up in price and earnings multiple but it is still cheap. Especially compared to AMZN-Q.

This is fully priced at these levels. They’ve done a pretty good job of growing online, and can be competitive with Amazon (AMZ-Q) to a certain degree. They have to decide how the store will look in a new retail environment.

Kind of one of the anti-Amazon names. Despite the perception, the stock has lagged behind over the last 2-3 years, especially as compared to Amazon. They are growing their top line and are doing quite well in their battle with Amazon. They’ve shifted to an e-commerce platform, very successfully. Free cash flow yield on this is 10%.

This has been a great performer over the past 2 years. Wait for a pull back, and let’s see what happens with holiday sales. A time to buy a name like this was 2 years ago when it was thought Amazon (AMZN-Q) was going to put them out of business. They do a great job of returning cash to shareholders. The acquisition of Jet.com made a lot of sense.

It will be a goliath vs. goliath war. They have the plant and equipment. It is a cost game. AMZN-Q has the momentum, but WMT-N is the best candidate to take them on. He is focused on the battle which is going to be fought here.

He is optimistic this company can hold its own against Amazon (AMZN-Q) and other online marketers. As an investment though, he has become increasingly neutral, as the stock has moved up dramatically from its low of $57. Their Jet.com acquisition made a lot of sense, and show that they are willing to commit capital to really go head-to-head with the Amazons of the world.