Daniel Gross: Tough Economy Is Walmart’s Sweet Spot
I wrote about Walmart (WMT) positively last Tuesday and an interesting way to play the stock, and yesterday Dan Gross put up an article on Slate that makes the same point: a tough economy is Walmart’s sweet spot.
He gives four reasons:
(1) Walmart sells staples, not discretionary items, that people buy no matter the economy.
(2) Walmart is the price leader which does poorly in good times as people trade up, but well in bad times as people trade down.
(3) The Bush stimulus package puts money in the hands of Walmart’s core customers.
(4) International growth is starting to help overall growth.
I’m liking this trade more and more. It almost seems like a guaranteed 12% annual return.
Disclosure: Top Gun is long Walmart (WMT) shares and short Walmart calls.