Walmart Inc (WMT)

(Top Pick Feb 5/16, Up 5.84%) They were higher, but fell a little bit. This one got hit a little bit more than the sector. It is going to focus on its comps and its digital business. It is doing a bit of base building. You get paid nicely to hold it now. If it does not hold $65.80 then he would be concerned. It looks good here at this level.

If Chinese imports are taxed, it will really hurt Walmart. Don’t buy above the 52 week lows.

This caters to the low to middle part of the market, which is Donald Trump’s market. If he does what he says and it works, this company will benefit long-term because their customer base will benefit. On the negative side, they are subject to Amazon (AMZ-N) eating away at their bottom line, stealing their customers who order things regularly. Retail is not an area he is interested in buying.

He is underweight a lot of US retailers. This one could be negatively impacted by border adjusted tariffs, which would certainly have an impact on their bottom line. He doesn’t own this, primarily because of secular growth concerns. E-commerce and Amazon are having a big impact on their business. Valuation is not all that compelling, and you are looking at flat earnings growth during the next couple of years.

*Short* Largest retailer globally. A phenomenal company that has had a virtuous cycle of buying for less and selling for less, but unfortunately it is hard to see incremental new growth. It is getting attacked by the Amazons of the world. They do have an e-commerce platform, but it is really not going to move the needle. This could have a very substantial impact if the US border adjustment tax were to come in. Dividend yield of 3.01%. (Analysts’ price target is $73.93.)

Not a huge fan. It is becoming tougher and tougher for them to grow revenue. They already have stores right across the US, so you have to question how they are going to grow. They will continue to open stores, but they are already penetrating all major markets in Canada and the US. The next question is, will they go global. That is what they will need to do to see any meaningful lift from here. With the online shopping that is available, it is putting a lot of pressure on this company.

He would rate this as a Sell to a Hold. He is concerned about the long-term future in terms of generating the earnings growth. They are pretty saturated across North America. Expansion is going to have to come internationally, and they had to give up in Britain. They can only tighten margins so much. Where they are really going to be in jeopardy is if some huge protectionist bill comes in. There are a lot of better places to be.

He likes this company, because it has a 3%+ dividend, giving you some ballast, and defensive characteristics should this market get volatile. It is also good if you are sceptical somewhat of the US economy taking off. This company tends to outperform when the market is going down. It has pulled back in the last few weeks.

They have some catch-up to do on their on-line business. 70% of products are from China and that could be a major headwind for them as well as every other retailer.

A great franchise, but a bit expensive. Trading at about 15X earnings with a pretty low long-term growth rate, probably in the low single digits. They’ve had to spend money on increasing labour costs, and beefing up their e-commerce digital offerings. This is a consumer staple name, and money is being taken off the table and being put into more cyclicals. The stock recently dropped its 200 day and 50 day moving averages.

This is facing a number of challenges with the new administration, chiefly with the Trump Jihad against China. So much of what they sell is imported from China. Walmart is very, very big and a slow grower. He always prefers predictable, slow, dividend payers to companies like Amazon (AMZN-Q).

They have headwinds. It is somewhat misunderstood in its positioning as a retailer. 60% is groceries and that is a tough market, going through deflation. Also, they appeal to a demographic that is not in the spot light right now (people in tougher financial positions). There is a strong social push toward higher pay and many of their employees are at minimum wage.

Trading at a market multiple. He likes it a lot. 2.9% dividend yield. One of the few big-box retailers that has the capability of going toe to toe with Amazon. They are buying back a tremendous amount of stock, and investing more into their e-commerce. Doing strategic acquisitions. Still likes this going forward and thinks it is an undervalued company.

A great company. The problem is, it is an enterprise that is so large that they have all the incremental shoppers, and there is nothing more that can be done. They are struggling with e-commerce. In the law of large numbers, it is hard to move the needle. Expects margins will continue to be under pressure for some time.

15.5% upside to model price. Consumer discretionary has been decimated. It plods along. It will not go down 30-50% on bad news.