Buffett and Soros Are Buying Retail. Why Aren't You?

It seems like consumer-related stocks can't get any love from investors these days. Except perhaps in the warm embrace of two of the world's greatest investors: Warren Buffett and George Soros. The duo reported increases in their stakes of Wal-Mart Stores (NYSE:WMT) this week, prompting investors to utter a collective "huh?"

In the most recent quarter, Soros' hedge fund upped its stake in the retailer by 1 million shares, giving it ownership of "just" 1.1 million shares. Small potatoes compared to Buffett-run Berkshire Hathaway's (NYSE:BRK-A) near-doubling of its claim -- which soared from 19.9 million shares to 37.8 million. With his newly acquired stubs, Buffett's position in the company comes to more than $2 billion. Buffett also increased his stakes in Wells Fargo (NYSE:WFC) and ExxonMobil, as my Foolish colleague Morgan Housel explains.

Despite the rapid run-up in the S&P 500 since its March 9 lows, Wal-Mart has been a virtual snooze. While the S&P gained more than 60%, the retailer tepidly climbed just 16% from its low of the year. In fact, about the only place this retail giant was dwarfed by competition was by rivals' stock appreciation:

• Target (NYSE:TGT) -- up 94% from 52-week low.
• Costco (NASDAQ:COST) -- jumped 59%.
• BJ's Wholesale (NYSE:BJ) -- climbed 33%.

And that, I guess, is exactly the point. Wal-Mart is so dominant that its stock never cratered quite the way others did in the downturn. Everyone expected Wal-Mart to rock in an environment where consumers were increasingly unemployed and addled by runaway debt. Wal-Mart's ruthlessly efficient supply chain means it can beat anyone on price. It's even taken on Amazon.com (NASDAQ:AMZN) with its recent price-slashing for the holiday season.

If rock-bottom prices are Wal-Mart's competitive advantage, then is Buffett's purchase saying something about the overall economic climate for years to come? After all, Wal-Mart has hardly grown profit during the recession, and in its most recently reported quarter, the king of cheap put up just 3.2% year-over-year earnings growth. Sales gains have been just as abysmal. Unemployment is notched above 10%, and many economists think it will be a long time before much improves. Moreover, at a P/E ratio of 15.5, Wal-Mart doesn't scream cheap.

Buffett has always coveted such efficient businesses, enthusing in the early '80s about his purchase of Nebraska Furniture Mart, whose matriarch, Mrs. B, was willing to undercut any competitor, including her own children. In fact, Buffett has long regretted not buying shares in Wal-Mart back in the '60s and '70s.

But is now the time to buy Wal-Mart? Given the company's size and reach, how much further can its shares grow? Is another retailer a better bet? Let me know in the comment boxes below.