Jack, During Q2 the DOW increased about 20%, the highest level since Q2 of 1987. You do remember what happened in October 1987. As far as Barron's goes, I honestly find they are wrong more than they are right. And Abelson is only there, because of favors from close contacts.
I do though understand their (and other's) reasoning, and attempts to justify the current valuation of WMT. And to me, that spells opportunity. You see, basically WMT is trading with assumptions that are "perfect". It will only take one piece of unpredicted, or one piece of bad news or circumstance to cripple this bull. I've seen this bull mania on retail stocks, and heard the same arguments so many times before, its like living next to a time machine. Please also realize, that it only takes one month of poor retail, or profits to derail a retailer's results. Whereas most other sectors, can "make it up". A retailer cannot make it up. Ever. Also, it is impossible for a retailer to be perfect or even near perfect. They will either have too much inventory(over estimated sales) leading to reduced margins to clear it out, or they will encounter out of stock(under estimated sales), leading to loss sales and profits. This is retailing.
Now, the main premise of WMT bulls is WMT's ability to continue to grow profits. To do this, they have to grow the top line. They are struggling to grow at 11%. Sooner or later, investors will realize, that no matter how many times you flip over the hour glass, you still have the same amount of sand. I strongly believe, that time is running out, and remain absolutely convinced of a severe correction.
I also know that WMT has been sending out an inordinate amount of VCB's (vendor charge backs) this month. Seems they are desparately trying to make the bottom line numbers. LF |
