WMT update

We refer to are most recent take on WMT as of April 6, 2018. for the “big picture”.

wmt aug 17 2018

In our view what has transpired since is that we had a first wave down of about 28 points, from 109 to 81, followed by a second wave correction of about 76%. This happened on very high volume on supposedly excellent earnings and a 40% (anticipated!) growth in e-commerce. Actual earnings inclusive of all items were down almost 3 bln. year-over-year. Cremer’s Mad-money show, or whatever it is called, was quick to grasp the opportunity to call for a change from FANG to WANG, this while pressing the appropriate emotion buttons on his desk. Spin is everything!

This is , in our opinion, is another opportunity to get out while the going is good.

WMT, Wal-Mart Stores Inc.

wmt aug 23 2016 bwmt aug 23 2016

Walmart has not been a great winner for us, this time around we hope it will be. This stock is a sell!

It has a very distinct triangle and even if it is not in fact a triangle, it is still a ten year congestion period which in the end was resolved to the upside. Typically, after that, it should return to the lower end of that range, about $43. Obviously it has not done so. Usually that simple means that it will still do that. As it happens that level is pretty well exactly where the stock would go if it is presently in an A-B-C correction. The B of that structure has now retraced 61.8% or so of the initial drop and even though that does not mean that it cannot go higher this is nevertheless a reasonable point to expect a drop.

Fundamentally, something we give very little weight, the bottom 50% of the US population is close to being penniless and these are typically their clientele. Things are getting worse. Dividends for the past 3 or 4 years have been increased to keep the 43 year run going, but only by the smallest of margins. Stock buy-backs are what has kept this stock suspended at these levels, not a very robust situation.

WMT, Wall-Mart again

wmt b sept 2012wmt s sept 2012

Wall-Mart is America’s largest retailer, largest employer and largest importer (from China). It is also known for it’s anti-union approach which got it kicked out of a new shopping center in New York. This stock is perverse, doing what it should not do. Whereas the slogan was, “What is good for America is good for General Motors” or vice versa, with regard to WMT is should be  “What is bad for the US, is good for WMT”. Which, by the way, explains why we got it consistently wrong when it came to this stock.

Things are bad in the US. More people are now receiving food stamps than ever before. Last month more people applied for disability benefits than got jobs. According to Shadow Government Stats (www.shadowstats.com) unemployment in the US is running at about 23% (about the same as Greece and Spain), CPI is about 5% and money supply is dropping like a stone. Little wonder than that WMT is up about 50% over the last year. However, this is an E-wave blog and that should be the main determinant for the outlook. Notice that WMT has been going sideways for about 13 years. Only recently did it get back to the highs of 1999. It looks like the stock was tracing out a triangle of sorts either for this entire period (making the latest spurt up a thrust), or for just the last 3 to 4 years (making this a B-wave). We do not know exactly how much further it could go (if it is in the 4th wave of a thrust it could add another $10 or so, if  C=A on a proportionate basis we are already done), but with almost certainty this stock should trade at $45 sometime in the near future. $10 up very maybe against $30 down with almost certainty is not a good risk/reward proposition.

By the way I was speaking to a chartered accountant turned realtor over the weekend in Toronto who explained to me that this perverse relationship is what is behind the city’s real estate boom. People pay close to 2 mln. for a 2400 square feet house with a postage size garden. Locals cannot afford these places unless they got on the bandwagon years ago. It is people from China, Russia, Egypt etc. etc. that buy because they do not care about the return on the investment, they just want their money back some day. Law and order, utter boredom and the Mounties make Toronto a haven like no other.

WMT Jan. 2010

WMT is another one of those stocks that is impervious to the market in general. It looks a lot like Colgate-Palmolive except it was not able to thrust up after the triangle appeared to be complete. This may indicate a failure which would support the idea of a reasonable sharp decline. Before that the stock could still gain a dollar or two but I doubt it. Why the stock might go down is not clear, other than the pattern of course, but within the context of China/USA Wallmart is the poster child par excellence and the possibilities are legio. Moreover WMT is famous for its great labor-union relations which may start to deteriorate for real. In the end, under the new Obama approach for trade, less imports more exports , it is perhaps good to remember that WMT is the single largest importer in the US (mostly from China).

WMT Jan 2010WMT Jan 2010 2

Click on charts to enlarge!