Walmart Inc (WMT)

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.

It is not a bad company, but he is not a fan of it. He prefers Amazon. Earnings should be flat in the next quarter as they reinvest earnings to compete with Amazon. They are playing catch up. There is risk and no growth.

They are going to pull back the number of new store openings and focus on their online presence expansion. There won’t be earnings growth for the next few years. She prefers HD-N.

(Market Call Minute.) He likes this and what they are doing on the grocery offering where you can order your groceries online. They are using Uber and other deliver services to get it right to your door. They also have organic as well.

Amazon has affected the retail environment for a lot of traditional retailers. His concern would be how this company pivots; how they react and whether or not they can increase their e-commerce presence. The free cash flow yield in terms of long-term growth is hard to reconcile in a company like this. Doesn’t think growth profile is all that robust.

The type of company that is very deflationary. They move into a town of 100,000, and wipe out Main Street so that nobody has a job. On the other hand, you have Cosco that wants to pay their workers well because they want them to have a house, have kids and be part of the economy. The trouble with a Walmart business model is that you can only push prices down so far before it starts having an impact.

The US retailers had a pretty horrendous quarter last month, and this one stood out as having a good quarter after having warned earlier. Had warned earlier in the year because of higher wages, as well as spending money on improving their online experience. Very cheap on valuation. Slow and steady company. Trading at 16X PE and a solid balance sheet with a good yield of 2.82%.

Same-store sales was a bit of an issue in an unexciting stock. It is so big and so entrenched that it is hard to see how they really get beyond GDP growth kind of revenue. She is on the sidelines for this.

Hasn’t been a big fan of this for a while. They put up some pretty big earnings recently. The problem is that it is being squeezed. You have high end boutiques taking one set of customers, and dollar stores take the other set.

This is tricky. There are a few things happening as to where the US$ may go and how it affects international revenues coming in. If the US$ starts to move significantly higher, you may see this company slow down a bit, as they depend on a lot of revenues coming in from outside of North America. However, there are some things the company is working on such as e-commerce, their labour force and increasing their minimum wage. It looks a little pricey to him, so he doesn’t own it.

Many retailers suffer, but overall some of them are actually doing well. If there was too much optimism priced in, or a lack of recognition of how much online was going to take from their business, that is when the stock really gets hammered. This has economy of scale with over 11,000 stores. Part of the challenge is that they operate with very thin margins, which doesn’t leave much of a buffer to cut prices when they start to sit on inventory. To combat online shopping, they are using price matching. Also, getting into the organic space in groceries. He wouldn’t be in a rush to buy this, because it is still unclear how the disruption in the retail space is going to take place.

(Market Call Minute.) Everyone is concerned about online pressures from Amazon (AMZN-Q) and others. The company generates a lot of cash. Not as cheap as it was.