WMT46.54, -0.71, -1.5%) .
Its global girth notwithstanding, Wal-Mart's shares are changing hands at a puny 14.1 times 2007 earnings expectations and have been bound in a tight mid-$40s range for better than a year. In the last five years, the stock has dropped nearly 14%.
But it's ready to pop again, according to Bill Dreher, senior retail analyst at Deutsche Bank Securities. "Wal-Mart shares are well-positioned for a rebound," Dreher said. "They've got more internal initiatives going on and gaining traction right now than we've seen in years."
CHICAGO (MarketWatch) -- The dollar is weakening, the housing market is cooling and consumers, as a result, are reining in their spending. That doesn't sound like the ideal backdrop for investing in the stock of retail companies.
But for those who are willing to take a little risk, and who have better-than-average patience, now might be the right time to latch on to the retailers, particularly the discount operators. As consumers tighten down on budgets, the logic goes, discounters and dollar stores stand to benefit from an influx of bargain-seeking customers of all income levels.
The biggest and perhaps the most obvious benefactor is the merchandising monster of the industry itself, Wal-Mart Stores Inc. (WMT : Wal-Mart Stores, Inc.
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Indeed, Wal-Mart's top executives are shaking up the place at the same time that the economic stars are lining up. New, hipper and even pricier merchandise is showing up in smartly remodeled stores that have been noticeably cleaned of clutter.
Add all that and more up and Wal-Mart, which is scheduled to report earnings next week, could return to the top spot as the general merchandise retailer with the best return on equity as well as invested capital, Dreher said.
"This is a company that is no longer focused just on pushing sales but on profitability," he added. "That will make the stock move."
He likes others in the discount space as well, such as Kohl's Corp. (KSS : Kohl's Corporation
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"All of these stocks are trading at significant discounts of their own historic valuation and growth rates," he said. "They're well-positioned to be able to survive a secular rotation out of retail should investors become more concerned about the potential for a consumer slow down in spending.
Retailers poised |
