“Wal-Mart will go to $100”.

“Wal-Mart is inexpensive and it is the inexpensive alternative to Amazon.”

Oops… Jim Cramer said it.

Sorry, but that’s a just a “filler” thesis.

I’ll share real reasons for why Wal-Mart (WMT) is inexpensive through a unique perspective experienced over the past 6 months.

First, let me start with some confessions.

  • I haven’t done well with retail investments. Have avoided them generally.
  • I bought Whole Foods estimating the intrinsic value to be between $38-$50 but then lowered it down to $32 to $36 a couple of years later. Sure it was bought out by Amazon at $42, but I find that to be a lucky ending.
  • I have been part of the Amazon ecosystem (Amazon buyer, Amazon seller, AWS, PPC) in a far more intricate way than most investors, but couldn’t see past the price.
  • Purchased Wal-Mart based on quantitative fundamentals measures. Otherwise, would not have purchased it.

    • Now here’s why I’m long Wal-Mart and why it’s a long-term hold for my portfolio.

    Why Wal-Mart is Up 26%

    Amazon.

    Apple.

    Facebook.

    Google.

    These giant companies show that it’s not impossible for giants to grow.

    Finally, Wal-Mart has joined the party.

    Until now, Wal-Mart’s biggest problem was that of a typical brick and mortar company.

    It’s relationship with customers were purely transactional.

    Compare that to Amazon where the relationship is a deep and trusting friendship.

    For a company like Wal-Mart:

  • you go into a store
  • you get your item
  • hand it to the cashier
  • get annoyed if they are super slow
  • walk out

    • With Amazon, the experience is drastically different.

  • You go to the homepage and there’s a list of recommendations.
  • To make a purchase you need to trust that their site will be safe
  • You trust they will keep your credit card(s) safe.
  • You trust they will send you the correct item.
  • You trust they will delivery the item when they say they will.

    • I’m sure you’ve experienced the difference in the relationship yourself.

    Also, Amazon has become so ingrained with the US population that its Amazon Basics branded products fly off the shelf.

    Wal-Mart has finally wised up and understands the big picture in order to compete. It’s not just about “Everyday Low Prices”.

    It’s about the relationship.

    The market is slowly catching on as positive progress is being shown with the various omni-channel strategies taking place throughout the company.

    Market Excitement about Wal-Mart

    Wal-Mart up 26% YTD isn’t something you see often.

    With Marc Lore having been granted full blessings to go all out, the company has undertaken various strategies to fully utilize their potential.

    Print Friendly, PDF & Email

    Related Posts