Walmart Inc (WMT)

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.

Just reported earnings and beat consensus, but the stock faltered, probably because of a succession of lower expectations. They’ve done fairly well, especially in North America, in terms of same store sales and working hard on their online offering. Bought a fairly large online company and integrating it, taking Amazon (AMZN-Q) on full tilt. He would pass on this. There are a lot of unknowns, wage inflation and getting near full employment, and they have a very large labour force, mostly of minimum wage workers. 2.5% dividend yield.

Everybody has competition, but you want to try to avoid the very high levels of competition. This one is in a battle with Amazon (AMZN-Q). A lot of products you find in their stores, you can easily pick up in Amazon. A great brand name and well run, but she doesn’t like that much competition.

This has a very important period of seasonal strength, usually from the middle of January through until at least May, and sometimes into July. After that, the stock tends to go down. Currently, it is testing its previous level and is having difficulty getting above the previous high. If you are a trader, you should take some money off the table.

Widely viewed as an old time conventional huge retailer. He is positively predisposed towards it. They are one of the biggest Internet retailers. Feels this is going to be right up there as being one of the successful long-term e-retailers.

*Covered Call*. The company suffered and took a hit after Amazon (AMZN-Q) announced their purchase of Whole Foods. He thinks it got hit too hard. When you have a stock that drops like that, you tend to get the option premiums bumped up a little because there is a perception of greater risk. You have to like Walmart if you are going to do this, and you have to believe that they can compete very effectively against Amazon. He thinks Amazon is challenged with the “last mile” of delivery, which is the most expensive mile.

(A Top Pick June 3/16. Up 11%.) His view was that despite Amazon’s (AMZN-Q) dominance, this would be one of the survivors. They had a great balance sheet. High ROE at 18%, PE at around 17X and it generates a good amount of cash.

With Amazon’s (AMZN-Q) takeover of Whole Foods, what a lot of people didn’t know but are finding out now, is that Walmart is a huge grocer. Over 55% of revenues are in the grocery business. The Amazon news was a throwing down of the gauntlet. That is trouble for Walmart. Walmart also has the problem of taking on costs. They have a very large labour force, which is not particularly highly paid. He would stay away from this and let things settle out a little.

Has owned this for a long, long time. It is basically in the crosshairs of Amazon (AMZN-Q), but it is a retailer he would prefer over all others. They focus on the lower end of the market, which he feels still has decent growth ahead of it. The company is putting in the effort to fight back on the online side. Their e-commerce sales are doing very, very well. Not a super cheap company. They buy back oodles of stock every year.

You could buy Amazon (AMZN-Q) at 142X earnings, and a lot of risk goes with buying stocks with such a high P/E ratio. Walmart is trading at 17X earnings and gives a dividend of just under 3%. (Analysts’ price target is $74.)

Since the beginning of February, a lot of the most under performing stocks in the market have bounced, and a lot of the strongest stocks have had a little pullback. There are a lot of people who feel the PE multiple of the market is expensive, so a lot of investors have tried to take down the number of expensive companies in their portfolios. This is a good company, but it’s in the wrong place in the industry long-term. They will continue to be under assault from companies like Amazon (AMZN-Q). He would rather be a shareholder in Amazon.

There was a weakness in all the defensive names in 2016, but not pronounced as much in this company. The worst is now over and he can see some limited upside, probably running into some resistance at around $83. He has a technical target of around $85. They’ve made some good progress over the last year in changing some of their business lines. A good holding. Dividend yield of 2.8%. (Analysts’ price target is $73.)

They are getting squeezed. Retail is either going to the dollar store or on line. These guys tend to move as a sector.