Battle of the Discounters

Let's start the type of cocktail party conversation that only investors would enjoy. If you're looking to invest in the discount retail landscape, and considering an investment that will represent the best return for your portfolio, which is the best stock right now: Wal-Mart (NYSE:WMT) or Target (NYSE:TGT)?

I've often noticed with interest that Wal-Mart has both loyal fans and stalwart detractors. This retailer jumps out at me because in the three years I have been writing for the Fool, I have seen indications (from reader emails and discussion board postings) that many companies have "fans" who jump at criticism -- Apple (NASDAQ:AAPL), Sirius (NASDAQ:SIRI), and XM Satellite Radio (NASDAQ:XMSR) are solid examples -- but those same companies don't usually have just as passionate a group of haters that will write in. Wal-Mart, on the other hand, seems to evoke very distinct opinions from people on both sides of the fence.

Whether you think that Wal-Mart is an amazing company that's good for America or has evolved in many ways into the type of company corporations should strive not to be -- and there are arguments on both sides -- any investor who is looking into Wal-Mart right now has a lot to contemplate. At the crux of it is the company's future growth potential and how that will affect its stock price going forward. With Wal-Mart, the inevitable law of large numbers is definitely of concern -- this company is a behemoth, and that makes it more difficult to grow.

And then there's Target. Lots of investors love it for the fact that it's still got plenty of room to expand, and it attracts a diverse demographic, particularly a more affluent and financially resilient one, with its hip, bargain-priced merchandise. (Personally, whenever I go to Target I spend way too much money -- there's just so much cute, fun stuff.) Meanwhile, high-profile PR problems or complaints about its business practices are few and far between. Indeed, I ran across a Wall Street Journal article last month about community opposition to Wal-Mart, particularly in urban areas. It gave as one example Boston's mayor shunning Wal-Mart, but saying a Target coming into town would be just hunky dory. That highlights some of the conflicts.

There's a lot more I could say about both companies, but let's get down to it, Let the battle begin.

The power of community
Personally, I am of the pro-Target, anti-Wal-Mart camp. But before you decide to take me to task, Wal-Mart fans, consider that I'm not alone. (However, take heart -- I'm also definitely outnumbered, according to the data I'm about to explain.) You see, I was curious how these two companies might stack up against each other, so I checked out how they're doing according our new community intelligence system, Motley Fool CAPS, which is currently in beta release and is already more than 10,000 people strong. And I found some interesting results.

Both stocks exhibit a lot of enthusiasm from the community. Wal-Mart has been rated more than twice the number of times Target has. Out of all players, 80% think Wal-Mart will outperform the S&P. Out of our highest-rated players, CAPS All-Stars, the findings are the same -- 80% thumbs up.

Before Target proponents get depressed, consider that although the number of people who rated Target is smaller, this retailer got closer to a unanimous bullish response. A whopping 96% of all the people who have rated Target think the company will outperform. Out of All-Stars, one lone player took the bear stance on Target.

Maybe both stocks are destined to outperform, judging by this pool of community intelligence. However, you can just as easily take the contrarian approach to the data -- maybe too many people feel optimistic about one or both companies' growth potential. However you may agree or choose to be skeptical -- and we do value differences in opinion here at the Fool, and obviously within CAPS -- freely available information on a group's sentiment helps everybody, and each person's input helps make a stronger case for investors helping investors through CAPS.

What do you think?
At the very beginning of this article, I posed the question Wal-Mart versus Target, and asked what you think. I really do want to know -- specifically, through CAPS, so we can all ponder and analyze community data and hopefully enrich one another with our opinions and insights. The more people that participate, the smarter the system gets. We want experts and beginners, professionals and homemakers, shoppers and number crunchers. That's right, we want you.

Not to mention, CAPS allows participants to post "pitches" -- reasons why individuals think the stock's going to outperform or underperform. These pitches often include useful information, data, anecdotal evidence (or other forms of scuttlebutt), or insights, and sometimes short snippets that are downright funny. For this example, a pitch from lummox5 about Target cracked me up: "Their style will wipe the smile off that silly smiley face Wal-Mart logo."

Do you think Target's going to outperform the market over the long term? Do you think the 20% of CAPS players who are bearish on Wal-Mart are dead wrong and it still has lots of room to run? Then sign up for CAPS (it's free) and let your opinion be known.

It's difficult enough to find any kind of cocktail party where all the partygoers are investors who love to talk about and debate stocks and their future performance. But here at The Motley Fool, we're extending an invitation to a party of information that's 10,000-plus participants strong, and growing. They want to hear what you have to say. Get in on the buzz.

Wal-Mart is a Motley Fool Inside Value recommendation. XM Satellite Radio is a Motley Fool Rule Breakers selection.

Fool contributor Alyce Lomax does not own shares of any of the companies mentioned. The Fool is investors writing for investors.