Author Topic: WMT - Walmart Inc  (Read 64972 times)

rpadebet

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Re: WMT - Walmart Inc
« Reply #70 on: October 29, 2015, 03:54:40 PM »
I mentioned this to someone else but if WMT trades for 10x, they can start creating a REIT at a 5-6% cap rate versus the 10% earnings yield the stock trades for.  900mm square feet of real estate gives them a lot of protection.

Anyway who knows if they do it or not but those assets are real and you can unlock them if necessary.

I don't know guys, but once you start hoping for a retailers value to be realized through real estate, you are clubbing it with the infamous Sears and Jc penny....

Maybe you guys are more pessimistic about wmt than I am. :)

I like wmt is investing in growth now. I don't care whether they make their eps. If eps driven investors dump the stock because of this, I will gladly buy. I am yet to see a strong strategic offense being mounted  towards AMZN.  I will be out until I see clear decisive, all in commitment towards that.

I guess management change is required to overhaul strategy to such extent. So that could be the investment catalyst here.
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rpadebet

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Re: WMT - Walmart
« Reply #71 on: October 29, 2015, 04:20:32 PM »
No sarcasm there at all.  I sincerely congratulate you or anyone else who had the guts to take a position in Amazon at $300 and get a double out of it.  Now, I'm not kicking myself for sitting on the sidelines as I often do when I miss a big move, because I still don't understand the rationale behind it. 

To your point that it was cheap at $300 in your opinion (and less so now), what was the intrinsic value calculation that you made to get that view?  This is not meant as a "gotcha", it is a legitimate question to see what I'm missing. 

From the original discussion on the Amazon board to now, I haven't seen anyone do a realistic intrinsic value calculation that justified the investment.  It was always based on the argument that Amazon will be bigger tomorrow than today and revenues will grow for a long time.  Well, okay, yeah but that doesn't mean it's cheap.  Whenever I tried putting numbers behind it, there was no scenario that was even close to realistic that PV'd back to being a value based investment.

Dwy000,

Why do you need to calculate a specific intrinsic value? Does it make a better investment only if you can calculate something exactly? We are not talking about a melting ice cube in AMZN or a steady slow grower w hich can be modeled in excel.

Heck I don't even know if their largest business 15y from now will be retailing or aws or media or advertising. Each of these has their own economics and scalability factor.

Their retail scale helped incubate aws. Their aws scale along with prime subscription is now helping incubate media. This could eventually help incubate advertising which feeds into retail again. It is the flywheel effect.

I can't really figure out what the sell price on such a business should be just yet. Once growth saturates, reinvestment opportunities run out and they start paying dividends or start accumulating cash, I could then hopefully put a sell price on it.


AMZN is to WMT, what WMT was to SHLD 20-30 years ago. WMT should know that to survive and thrive, they need to drastically reinvent themselves for the next generation. If they are smart they will use their B&M stores and cash flow to fund that reinvention. MSFT had to do this recently. IBM did it a few times and has to do it again. Most good companies figure out they need to do this eventually.
You can't connect the dots looking forward you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future. You have to trust in something: your gut, destiny, life, karma, whatever.
                       - Steve Jobs

Picasso

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Re: WMT - Walmart Inc
« Reply #72 on: October 29, 2015, 04:20:45 PM »
Walmart actually has a competitive advantage versus JCP or whoever else. Their real estate or other assets are just a form of asset protection on the downside.

I supposed the assets that GE or MCD has sold/might sell makes them like JCP in that logic.

You also happen to get the low cost leader that will still be generating substantial cash flows iin 10, 20 plus years.

dwy000

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Re: WMT - Walmart
« Reply #73 on: October 29, 2015, 04:29:59 PM »

Dwy000,

Why do you need to calculate a specific intrinsic value? Does it make a better investment only if you can calculate something exactly? We are not talking about a melting ice cube in AMZN or a steady slow grower w hich can be modeled in excel.


I don't need specific, down to the penny calculations and I think you understand that.  But there has to be some estimate of intrinsic value or there is no basis to say that it's a buy.  Surely it's not inexpensive at any price, right? So why is $600 too low? or $300? or $20? or $1000?

Isn't the whole premise of value investing the idea of buying $1 of value for $0.80 (or cheaper)?  How can you buy something without having a view as to what the true underlying intrinsic value is?  And that value has to be based on some rational view of future revenues and cash flows.

Schwab711

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Re: WMT - Walmart Inc
« Reply #74 on: October 29, 2015, 05:19:47 PM »
Do you think Buffett would rather own 100% of PCP or 17.5% of WMT (both roughly $32b)?

17.5% of WMT generated $2.9b in FCF
100% of PCP generated $1.25b in FCF (probably more like $1.4-$1.5b "earnings power")

FCharlie

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Re: WMT - Walmart Inc
« Reply #75 on: October 31, 2015, 08:09:54 AM »
I would not be surprised at all to see Buffett buying WMT at these prices.

What is amazing to me is that many people are now predicting the slow death of WMT. I've never known a company that is growing same store sales, growing square footage, and generating enormous and growing operating cash flow, to be dying. It's almost as if people are looking at the stock price decline and assuming it must be because the company is dying and this will continue forever, that anyone who invests is guaranteed to lose should they hold long enough.

WalMart just gave a three hour presentation to the investment community, the presentation is on their website. The main driver of flat sales is not declining same store sales. In fact, same store sales are rising. The main driver is currency headwinds. The main driver of declining E.P.S. is the massive investment in wages. These investments are stretched over two years and will moderate after next year.

WalMart generates a staggering amount of cash. Their capex is going to moderate after next year, at the same time the investments in wages will moderate. This company will generate a ton of additional free cash, on top of the significant free cash they generate today. The $20 billion buyback will create enough cash savings on the dividend to allow WMT to raise the dividend over 10% and still not pay out more total cash. The company owns a giant real estate portfolio, but unlike Sears and JCPenney, WalMart owns this property and still makes a ton of money too.

Ultimately, the investment thesis is that I can't see any possible way Wal Mart investors at today's prices lose money long term. The next couple years of dividend and buyback as noted above are worth $14 per share alone. The real estate is likely worth half the stock price. Sales are rising, the store footprint is growing, free cash flow will rise, the dividend is rising and has been increased every year for almost 50 years. The buyback is giant and puts a strong floor under the stock price. Amazon is not going to kill WalMart. WalMart has too much financial firepower to just roll over and die. At today's prices and using today's likely trough earnings, a discounted earnings or cash flow calculator tells us that WMT shares are pricing in only about 2% growth into perpetuity. Those types of assumptions, which can easily be exceeded simply through share repurchases, are the types of assumptions I look for. Combine those low growth assumptions with a growing top line, growing footprint, growing same store sales, massive real estate, massive buyback, rising dividend and I don't know what else a value investor would need to make this a significant position.

CorpRaider

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Re: WMT - Walmart Inc
« Reply #76 on: October 31, 2015, 08:19:20 AM »
Yeah i was sort of thinking about the potential opportunity here, but ive pretty much decided on adopting "no retail" as a permanent item on my checklist.

Cardboard

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Re: WMT - Walmart Inc
« Reply #77 on: October 31, 2015, 08:21:51 AM »
I agree that the assumption about Wal-Mart dying are grossly exaggerated. In Florida last year, the store close by my place was jam packed every day. They are very busy in Canada too and their addition of grocery is a success.

It is funny that people are destroying Wal-Mart share price with justifications like Amazon will take over the world but, not Kroger, Loblaws, Target (16 to 19 times earnings vs 12.5). Are these not the real fatalities down the road?

Wal-Mart is not cheap enough for me yet but surely getting there.

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johnny

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Re: WMT - Walmart Inc
« Reply #78 on: October 31, 2015, 08:36:46 AM »
I realize that this is in some sense just polite adoption of corporate framing, but this idea that Walmart is "investing" in wage increases is nonsense. Wage increases are an expense, not an investment. The fact that some $9/hr employee in 2015 will make $10/hr in 2016 has absolutely no positive impact on the results of the company in 2017. This is not a sign of strength, but weakness. And considering labor productivity is perhaps the Number 1 domain where Amazon's retail model triumphs over Walmart's, I think it should be very concerning to see them tacitly acknowledge they'll have to spend even more on labor just to tread water.

Believe it or not, I'm still on the fence about Walmart. I am considering buying it right now, but more as a trade than anything (I do think their death will be quite gradual, and their buyback plans are aggressive). I don't think it is up for debate that they are currently losing the most important fight of their existence to Amazon. That doesn't mean they can't come back, but my concern is that they seem completely delusional about what it is going to take to do that, and in projecting their delusions, are building up an equally delusional base of investors. Not you guys though, you guys are lovely. ;)

I'll watch this video and share my unappreciated notes on it later.

rb

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Re: WMT - Walmart Inc
« Reply #79 on: October 31, 2015, 09:40:21 AM »
I realize that this is in some sense just polite adoption of corporate framing, but this idea that Walmart is "investing" in wage increases is nonsense. Wage increases are an expense, not an investment. The fact that some $9/hr employee in 2015 will make $10/hr in 2016 has absolutely no positive impact on the results of the company in 2017. This is not a sign of strength, but weakness. And considering labor productivity is perhaps the Number 1 domain where Amazon's retail model triumphs over Walmart's, I think it should be very concerning to see them tacitly acknowledge they'll have to spend even more on labor just to tread water.

Believe it or not, I'm still on the fence about Walmart. I am considering buying it right now, but more as a trade than anything (I do think their death will be quite gradual, and their buyback plans are aggressive). I don't think it is up for debate that they are currently losing the most important fight of their existence to Amazon. That doesn't mean they can't come back, but my concern is that they seem completely delusional about what it is going to take to do that, and in projecting their delusions, are building up an equally delusional base of investors. Not you guys though, you guys are lovely. ;)

I'll watch this video and share my unappreciated notes on it later.
"Investing" is just retail jargon the whole industry talks like that. "Invest in wages", "invest in price cuts", etc.

I don't really see how the wage hike is a weakness. They didn't have to do it because they couldn't find staff. I think they just tried to get ahead of a public and PR wave that's coming. That's actually better than in the past when they've been on the wrong side of that wave. I also think you're totally wrong in your thinking that Amazon will have a wage advantage over WalMart. Amazon whether they like it or not will have to hike/match wages. Other retailers probably as well. The only difference is that Walmart actually has the cash flow to pay the raise.