What Did You Buy Today?

[fenders53]

(04-29-2020, 02:10 PM)Otter Wrote:

(04-29-2020, 09:51 AM)kblake Wrote:

(04-29-2020, 09:32 AM)fenders53 Wrote:

(04-29-2020, 09:28 AM)Otter Wrote:

(04-29-2020, 09:18 AM)kblake Wrote: I just bought WMT. Its a reliable stock and one that will do well in any economy. Its down $4 today on rotation but I think this is a $150 stock by years end. COST also on my buy list.

Great company, but I don't see the value there. Trading at a decadal premium P/E of over 25, which is well above its 10yr average of 17.34. A reversion to mean over the next year would drop the price to ~$89/share. Earnings growth rate of only 1.58% over the past decade doesn't seem to justify the P/E premium. It's trading like a FAANG stock without the earnings growth to back it up, and with a total enterprise value of nearly half a trillion, the law of large numbers puts a cap on growth prospects.

Like AMZN, not a company I would ever short, but can't see buying in at these valuations. 

Money will rotate out of WMT and some of the over-hyped consumer non-durables when virus hoard frenzy ends.

I disagree. WMT deserves a higher multiple. I don't care about graphs or history. You can throw that all out. Stocks go up over the long term on fundamentals. And WMT is killing it especially on line. They are the 1 company that can compete with AMZN. Forward PE is only 16 which is cheap. There sales are the best they have been over the last 5 years.

Where are you getting a forward P/E of 16? FAST Graphs uses a blended P/E that blends TTM and forecast earnings. GuruFocus shows a forward P/E of 24. Yahoo Finance has 24.75.

I agree that in the long term, stocks are driven by fundamentals, which is why I think they are overvalued on pretty much any metric. Walmart is absolutely enjoying the best sales it has had in years, along with Costco and a number of grocery stores. I think that is more a short-term effect of them continuing to operate during lockdowns and the bulk buying that was occurring in anticipation of and during lockdowns. Their pre-COVID sales numbers are likely more reflective of what the company does in a normal business environment at the top of a bull market. 

Roughly 60% of Amazon earnings come from AWS, and not from low-margin retail. WMT would have to take substantial market share from AMZN at such low margins to justify paying $25 for each $1 of earnings, for me. 

For the same relative price, you can pay $25 for a $1 of ADP earnings, which has grown earnings by about 11% annually over the past decade (10x better than WMT). They also have an AA credit rating (.17 debt/equity ratio vs. .43 for WMT), 44 years of dividend growth history (47 for WMT), a current yield about 85 basis points higher than WMT, and a Chowder Number of 16 (vs. 4 for WMT).

The bolded part is exactly my impression too.  As you know I work PT at HD.  We don't sell anything particularly necessary like groceries.  We are limiting traffic and crushing sales, because we are open and most small BIZ is closed.  Sales are 130% of plan for weeks now.  Employee expenses are also through the roof.  Big box is the only game in town in MANY states, until next month.   

WMT SP is a year or more ahead of itself.  A fine company very long-term but valuation when you enter matters in the end.  I am anxious to see AMZN sales.  Revenue is going to knock it out of the park and we'll soon see what they spent to make it happen.   I sold my AMZN a week early of course.