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Opening Segment #3: |
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'Retail
Therapy' |
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Tuesday,
June 16, 2009 |
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Jim's
rating on
this stock |
STOCK
SYMBOL |
Closing
price that
day |
Full Company Name |
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WMT* |
48.25 |
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TGT |
38.62 |
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Jim:
You may not realize
it, and the press
will never even
allude to its
existence but, right
now, there is a war
underway for the
very soul of this
stock market. And
I'm not talking
about some kind of
cold war
stalemate... this
war is going hot!
The investment
ferment is divided
into two camps...
The members of the
first think the
economy is actually
getting better...
The other camp?
Those are the people
who think it is
getting worse... or
the more prevalent,
just staying the
same. That's the
context you have to
grasp before you can
understand the
significance of
something that
happened earlier
this week... when
Goldman Sachs
downgraded
Wal-Mart (WMT*),
and reinstated a
"buy" on
Target (TGT)...
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See comments continued below...
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Jim's Charitable
Trust Alert -
Just happened:
* Just
BOUGHT new bank stock:
Bank of
America!
& just
sold
all of Nike position *
see
all
Jim's
latest
holdings here> |
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Tuesday,
June 16, 2009
(Cont'd from
above)...
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Jim:
At first glance, a
meaningless Wall
Street exchange,
right?... It puts
the entire conflict
into perspective. I
bet most of you
homegamers who saw
this... if you saw
it at all... brushed
it off as something
unimportant,
irrelevant... okay,
two retail stocks,
big deal...
But, when someone
with great Street
credentials
downgrades a
Wal-Mart, and
upgrades a Target...
reinstated... you
can't generalize
away from that,
right... The analyst
calls were all about
the micro
differences at the
company level,
right? Wrong.
The analysts
ostensibly-innocuous
downgrade of
Wal-Mart from buy to
hold, and the
reinstating of
Target with a buy,
crystallized the
whole moment.
Frankly, it gave you
a total map of the
battlefield... You
see, this decision,
whether you go into
Wal-Mart or visit
Target instead, and
from there, whether
you should buy
Wal-Mart stock or
swap into Target's,
is a microcosm for
the larger struggle
for the soul of the
whole stock market.
That's right! You
heard me. An
ostensibly-innocuous
downgrade of
Wal-Mart from buy to
hold, and an
initiation of Target
with a buy... it
just nailed the
whole moment... Why?
Because these two
companies cogently
represent the
dichotomy views -
one positive and one
negative - on the
economy and the
stock market!
Target's what you
buy if you think
things are getting
better. Wal-Mart
works if you're a
pessimist!
Why would you stay
in Wal-Mart?...
Because, if you
believe the bears,
you believe the
following...
Unemployment's going
up relentlessly, the
stimulus will be
overwhelmed by the
tax increases from
Obama... there will
be no real upturn...
On the other side,
why would you go
with Target? Simple.
Because you believe
the stimulus is
going to kick in,
that unemployment is
going to bottom and
the credit situation
is going to
improve...
Who's right?...
Remember, stocks
forecast the
economy, usually six
months in advance,
so consider this...
Wal-Mart is down 11%
and Target's up 16%
so far this year...
So, right now, the
stock market has
spoken and it's
saying that some of
those 100 million
people who shop at
Wal-Mart each
week... they're
going to be going to
Target...
What will do the
deciding?... What's
the swing factor?...
This is where I come
in... I think that
with retail... and
it's something that
Goldman (Sachs'
analyst) doesn't
mention at all...
gasoline. It's
decline caused the
retail rally to
begin with. That's
why all the retail
stocks went up. And
if it were to power
higher... if
gasoline goes
higher... and goes
above $3 bucks, goes
back to $4... retail
will wilt, except
for Wal-Mart...
which comes right
back to the
trade-down play.
The other issue with
this call, is that
the analyst... whom
I think is really,
really good...
someone with a
terrific track
record... may have
come in a day late
and a dollar short
on this call. I
think she should
have downgraded
Wal-Mart at the
beginning of the
year, when gasoline
prices were really
low, and going for
more aggressive
plays like Target
months ago. Plus
last week, don't
forget, HD said
things are just
"less bad"... more
ammo for the "not
getting better"
camp.
So maybe the
macroeconomic lesson
we learn from this
tale of two
retailers is simply
that we should own
neither one.
Here's the bottom
line...
▼ ▼
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 The Bottom Line!:
Cramerican
translation:
Wal-Mart's dead
money. But I don't
think
Target (TGT)
could hit the target
price without a
decline in gasoline.
Still, if you find
yourself bypassing
Wal-Mart to hit at
Target, she could be
dead right on the
trade. But if my
biggest swing
factor, gasoline,
spikes on us, I'm
going right by my
Target, and I'll see
you at my glorious
Wal-Mart (WMT*)
on Route 22 in
Watchung, New
Jersey.
[verbatim recap]
[end of segment]
Read Jim's next Segment
here
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Read Jim's next Segment
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