It's easy to get caught up in the stock market's daily fluctuations. But it's important to take a longer-term perspective.
When looking at investment opportunities among consumer goods companies, Walmart (WMT -0.67%) stands out.
Here's why I think it's one of the best stocks to buy in the sector.
Image source: Getty Images.
Drawing a crowd
Walmart has its namesake stores in the U.S. and around the world, plus Sam's Club, its warehouse membership business. However, its U.S. Walmart stores remain its core business, producing more than two-thirds of the company's fiscal second-quarter revenue of $177.4 billion. The period ended July 31.
Walmart is proof that you don't need a complicated business to become widely successful. Management focuses intensely on keeping costs down so that it can provide consumers with ultra-low prices. It's simple, but executed extraordinarily well.
At a time when many retailers have struggled due to broad economic concerns, Walmart continues to do well. The U.S. division's same-store sales (comps), excluding gas sales, increased 4.6% in Q2. Customers remain drawn to Walmart, with higher traffic contributing 1.5 percentage points of that growth. The balance came from higher spending.
Retaining competitive edge
As the leading retailer that produces plenty of profit and cash flow, Walmart continues to invest in technology to remain competitive with the likes of Amazon by providing things like same-day pickup and delivery.
During the first half of the year, Walmart produced operating cash flow of $18.4 billion. And it spent $11.4 billion on capital expenditures, including more than half on items related to the supply chain and customer-facing initiatives that allow Walmart to better serve customers.
Most recently, the company announced a partnership with OpenAI to use generative artificial intelligence to improve the shopping experience.
A sound business concept, strong execution, and continued investments in the future add up to a buying opportunity, in my view.
