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Wal-Mart Stores, Inc.
The 47's

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By yodalives
May 27, 2005

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I was watching "Mad Money" today- Jim Cramer's show. Now in fairness I need to say that I am a different type of investor than Cramer with a very different investment approach- and of course, not nearly as much in capital to play with. Usually, after a little bottom up and value analysis, I come to the conclusion that Cramer's recs. are not for me- (selling at the highs for the year, often laded with debt, and selling at really high multiples)

Today when he was slamming Wal-Mart the company and the stock, I started to question myself- I just initiated a large position in Wal-Mart in the high 40's. Could I have been wrong? After some basic analysis and a drive by of three local Wal-Mart parking lots, a Michaels, a target, and a Bed Bath and Beyond- I instantly felt better. The Wal-Marts were loaded and all the others combined didn't have even half the cars of one Wal-Mart.

Today Cramer started off his show by giving 10 other companies that were taking away market share from Wal-Mart. (Best Buy, Whole Foods, Target, Sears Holding Co., Michaels and Bed Bath and Beyond to name a few.) Most if not all of these other companies, Cramer has buy recommendations on. I think Cramer is way off base. Many of these other companies are selling at their highs for the year (to me this means it is old news or I missed the boat- either way I am usually not interested). They are also selling at much higher multiples than Wal-Mart.

Cramer's main argument is that when people shop for things they don't want to go to Wal-Mart. I actually agree- I don't like shopping at Wal-Mart in particular- buy do you know what? I shop there and my wife shops there. We don't call it shopping really- we just pull in to pick up some things. This happens every week.

If Wal-Mart is going down then the parking lot and the books are misleading. And of course, while books can be misleading, parking lots don't lie. What Wal-Mart offers that none of these other companies offer- except maybe Target- is a one stop shop and the best prices. Most shoppers don't go to Wal-Mart to buy a TV or bedding or food. Of course they would rather get food at Whole Foods and bedding at Bed Bath and Beyond- but they go to Wal-Mart to pick up toilet paper or pens or razors, after all the Wal-Mart is very close to their home and these days time is short. While they are there they remember all those other little things they want and need and also, how little time they have in their day- so then they buy the bedding and food at Wal-Mart as well. On the way to the bedding they walk past the Toys and remember little Tommy's birthday and buy some toys. And then, lookie there.... those plants are beautiful etc., etc., etc... That is how Wal-Mart makes bank and Mr. Cramer is missing the boat. Or maybe, as I have long suspected, he is slamming Wal-Mart in public and buying it up in private. At least that is what I think. Wal-Mart is a strong BUY at 47. I don't host a show called "Mad Money" but if I shorted Wal-Mart in the 47's my money would not only be "Mad" but probably, also, GONE...

Dana


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