Fool Fight: Target vs. Wal-Mart

Welcome to another Fool Fight. Grab your ringside seat, please.

Our last bout, which featured American Airlines parent AMR (NYSE: AMR  ) and United Airlines parent UAL (Nasdaq: UAUA  ) , resulted in a decisive victory for United, thanks to several passionate Motley Fool CAPS players. Today, live from Aisle 3, two retail titans will shop till one drops.

Tale of the tape
Let's meet our combatants. In the red corner, it's Target (NYSE: TGT  ) , which let the warmth of brisk summer sales cast a glow on the latest quarter. And the retailer expects an equally bright holiday season. No wonder master investor Warren Buffett has loaded up on the shares.

Meanwhile, in the blue corner, it's Wal-Mart (NYSE: WMT  ) , which has earned Foolish fans for selling cheap medicines and for embracing the celluloid goodies that Hollywood has to offer. Perhaps that's why one Fool thinks the Bentonville Behemoth is the best blue chip for 2007?

Get ready to ruuuuummmmmmble!
Who will take the title? Ding! There's the bell! First out of the corner is Target, with this jab from CAPS leader Russell Carpenter, known in Fooldom as TMFEldrehad:

Another one of Mrs. Eldrehad's favorite stores. I think there will always be a certain segment of the population that wants something just slightly more 'upscale' than can often be found at Wal-Mart. This, combined with a greater selection than can usually be found at warehouse stores like Costco (Nasdaq: COST  ) , should lead toward profitable growth for some time to come.

Wal-Mart counters with a terrific one-two combination from pylortes that hits Target square:

The company with "everyday low prices" is selling for an everyday low price. ... I strongly believe the business model will work worldwide because everywhere in the world people appreciate buying an item for less. It's scary to think, but Wal-Mart still has a lot of growth left in it (right now they sell only 3% of the world retail goods, that's 97% left to conquer!). [Its] inventory management and logistics are the best in the world, and that will allow Wal-Mart to expand worldwide and build on its economies of scale in a way that no other company can.

Down goes Target! But wait! The retailer was only stunned. The standing eight-count ends and, as Wal-Mart closes, Fool co-founder David Gardner, a CAPS all-star, unleashes a powerful right hook:

Sitting on a $192 billion market cap, this stock [Wal-Mart] has now underperformed the market over the past 1-year and 3-year periods. And it's hard to get excited about this stock versus just the S&P's average when you consider the company has to stack on an additional $200 billion of market cap just to double from here. ... Wasn't Wal-Mart on the cover of Fortune or BusinessWeek a few years back, pointing out that we were now a Wal-Mart economy and noting the incredibly deep influence [the Bentonville Behemoth] has on American business? Hey, that was a great time to sell this stock. I'd still be selling.

Wal-Mart's cut! And it's a bad cut, too. Can the stock rally? Foolish designer Nick Whitmoyer, who goes by TMFWitty here in Fooldom, pushes Target into the ropes for one last assault:

Target has peaked and it's time to go short.

Let's go to the scorecard
That may be true; Target shares are up more than 25% since summer lows. Nevertheless, the cut over Wal-Mart's eye releases an ugly stream of bearish sentiment:

Metric

Target

Wal-Mart

Total ratings

419

1,029

Bullish ratings

393

831

Bull ratio

93.8%

80.8%

Bearish ratings

26

198

Bear ratio

6.2%

19.2%

Bullish pitches

76

171

Bearish pitches

3

57

Data current as of Nov. 30, 2006.

It's too much for the crowd, and the ref, to bear. In he steps and the fight is over! Target wins by virtue of a technical knockout!

Get in the ring!
Will the Bentonville Behemoth demand a rematch? Will Target, like former champ Buster Douglas, lose its aim? Get in the game now, and tell us what you think. Or, if you'd rather, choose one of the more than 1,500 stocks that have yet to earn a star rating in CAPS, including cosmetic purveyor Nu Skin (NYSE: NUS  ) and wireless technology specialist PCTEL (Nasdaq: PCTI  ) . Click here to rate either of them now. It's entirely free. Your Fool cap is waiting.

Wal-Mart is a Motley Fool Inside Value selection. Ask us for an all-access pass to the service and you'll be privy to chief advisor Philip Durell's best picks, which collectively are beating the market by more than 6% as of this writing. You'll also receive instructive lessons on valuation and company analysis. Give Inside Value a try; it's free for 30 days.

Fool contributor Tim Beyers has 31 picks in his CAPS portfolio, including tractor maker John Deere (NYSE: DE  ) , which he believes will continue to outperform the S&P 500 for years. Think he's wrong? Get in the game and add your own rating.

Tim didn't own shares of any of the companies mentioned in this story at the time of publication. Get the skinny on all of Tim's stock holdings by checking his Fool profile. Costco is a Motley Fool Stock Advisor pick. The Motley Fool's disclosure policy is always in fighting shape.


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