This Retailer Will Dominate in a Recession

Part of Walmart's (WMT -1.48%) brand is that it's going to be the low-cost provider in retail. That makes the company largely immune to cyclical shocks. Indeed, because its universally seen as the cheap place to shop, in a recession, Walmart not only does just fine. It might actually pick up market share. 

In this episode of "The 5," Danny Vena explains why he likes Walmart stock in a bad economy. This segment was recorded live on Oct 11.

Jason Hall: Danny, you kick us off on this. What's a recession-resistant company that you like right now?

Danny Vena: I'm going to start by saying that I think one of the most important things that you will hear ever come out of my mouth is, "Investor, know thyself." And like what you were just talking about, for people who want to stay fully invested, for people who need that edge by keeping a little cash, for people who have decided they need to be income investors, or people who need to be value investors, or people who need to be growth investors. Whatever works for you is the most important path that you can take as an investor, by knowing who you are, knowing what works for you and following that path.

Now, I say that because this is a stock that I don't personally own, but I think it's a great stock. When you talk about recession resistance, I don't think you can find a stock that's more recession-resistant than Walmart. If you go back and look at previous recessions, you'll notice that Walmart has come out of them stronger than it went into them. Because there's a phenomenon that happens. First of all, people may slow down their spending during a recession, but they still need products and services, they still buy things. But what they do is instead of buying the higher-priced goods, they buy the lower-priced goods. Where can you find the lowest price goods in the United States, if not in the world, Jason?

Jason Hall: Probably Walmart. I'm just guessing.

Danny Vena: Probably Walmart.

Jason Hall: The irony, too, is a lot of those lower-priced products or private label brands that it actually has better margin profiles on.

Danny Vena: It doesn't hurt Walmart not one little bit. Since then, Walmart has even taken steps to take on what many believe is its biggest competitor: Amazon. Walmart has done a fabulous job of building out their e-commerce platform, of expanding their buy on the website, pickup in the store business. Of all of those things that basically help them engage with their customers. What they found is for people who go to the website and put in an order and then come pick it up. Guess what? Some of them actually come in the store and end up buying other things, more than what they originally thought. For all of those reasons, if you want to recession-resistant stock, I think Walmart is par excellence.

Jason Hall: While particularly when you think about some of the other investments accompanies made. We know it has a pharmacy, and the company is really prioritized driving those co-pays down for medications. Over the years it's looking to add other healthcare services, optometry, so many other things that they're looking to do that's high into, Taylor, you were talking about healthcare companies in downturns as being recession-resistant. So Walmart adding more of those things in the store is important.

Danny, I want to say this about their e-commerce focus, I think the smartest thing Walmart has done is stopped trying to build e-commerce on brands that it acquired, and it's leveraging its Walmart name with its e-commerce platform. Then it's leveraging that huge, gigantic logistics footprint that it already has that puts it within 20 feet of 99 percent of Americans. Not really, but you get the point. That is such a competitive advantage and they are really doing a good job making the most out of that. Instead of buying other e-commerce brands that they think they need to have some other brand. Just let it be Walmart and that's gonna work just fine.

Danny Vena: It has continued to work fine. I think the most brilliant move that they ever made was acquiring Jet. It wasn't just because of the fact that they had an established e-commerce business. They got the founder of the company. And that guy was key to basically taking Walmart's existing e-commerce business and expanding it and doubling down on it and making it what it is today, which is probably one of the best-run e-commerce businesses outside of Amazon.

Jason Hall: Yeah, I think acquiring it was the second best thing they did. The best thing they did was just start calling it all Walmart. [laughs] I think was the smartest thing they could have done.