Walmart Inc (WMT)

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.

It is recovering nicely from some of its lows. It did not do well last year and has rebounded since last October. What has hurt it is the costs of e-commerce and the increase in wages. The US dollar is more of a headwind than a tailwind. He would stay away from the stock.

(Market Call Minute.) Likes as a short term hold, but longer-term he is worried about secular growth. It is in Amazon and E-tailing, and they are trying to reposition the entire store footprint. He would stay away if you are trying to hold it for 5 years, but as a trade it is a good proxy for the equity market going up.

The kind of company that would fit in his portfolio although he has never bought it. It had a rough 52 weeks, but is up 10% this year. It has turned the corner. They are huge, 11k stores, 400 added last year. Part of the challenge has been online shopping. Shoppers try products at Wal-Mart and then buy online. Wal-Mart is trying to close the sale by price matching. They are going to sell organic foods at 25% less. There are good growth initiatives. They are a low cost provider and so margins are thin so they feel FX hits. He would not be opposed to buying it although he has not pulled the trigger. Will they raise the dividend on May 11?

Had been in a monster sideways consolidation in 2013-2014. Popped out of it, and then failed. Went into a downtrend, but now we are consolidating again. A daily chart would show that the recent action has been good. There is significant resistance at about the point where it is now, around $68. You want about 3 weeks of it holding above $68, and if that happens, he thinks it will get back into the lower end of the old range of about $72. If it can break that, then it could get into the $80 area.

It is not the cheapest company in the world. There is significant overhead resistance at $68-69. Another issue is that the earnings forecasts are steadily drifting lower and that is a concern to him. It is neither cheap nor expansive. He would go somewhere else.