Author: James Roberts
Covestor models: Fortune’s Most Admired, StockDiagnostics, Best Ideas
When the poor tape action in Exxon Mobil (XOM) elicited a comment by Jim Cramer that the stock was overrated, I took decisive action and sold it. Significantly, I did not buy another oil stock to replace it, but decided to keep some powder dry.
Another stock that has a big following is Wal-Mart (WMT). I chose to sell WMT because I have been noticing that competition for the type of thrifty customer that Wal-Mart caters to is becoming more intense.
For example, Dollar General (DG) is doing well by adding more food staples and they are increasing their online presence. All of the dollar stores that I follow have been doing well. Whether or not Big Lots (BIG)is a dollar store is a good question, because Big Lots disappointed in its latest report.
Amazon (AMZN) had an upside surprise in its latest earnings report. Amazon is putting a big dent in Best Buy’s armor. I suspect that Amazon is hurting Wal-Mart to some degree already, and the trend might accelerate. I think that Amazon is impacting Netflix (NFLX), as well.
Target (TGT) has added grocery items at the store nearest my home. Kroger (KR) has used low-priced gasoline as an inducement to lure and retain customers through its loyalty card.
As if to validate the competitive landscape, Wal-Mart was especially competitive on the day after Thanksgiving by opening a bit earlier than the previous year and offering a little lower prices. Then there was the matter of bribery in Mexico, giving WalMart a black eye.
As a member of Sam’s Club and Costco (COST), I am forced to conclude that Costco is the superior choice for me. Nevertheless, I had to give up my efforts to save the Sam’s club membership fee when I had to replace my eyeglasses and Sam’s Club was the place with the Nikon lenses. I needed a battery for my car and Sam’s Club installs them while Costco doesn’t.
My admiration for Costco increased after viewing the documentary from CNBC entitled “The Costco Craze”. What impressed me the most was the elaborate testing they do on the toilet paper. Another impressive item was the relatively low salary the retiring CEO has been drawing from Costco.
In the Southeast, Sam’s Club has a lot more stores than Costco, so one could conceivably get a tank full of gasoline or two while on vacation. I manage a couple of pieces of real estate for my ex-boss who is a hedge fund manager.
One of the properties is a child care center that caters to low-income parents. I spoke to the operator a day or two ago and she told me that she had gained 4 students, but lost 5 in April. I’ve noticed that the ebb and flow of business at the child care center is helpful in giving me an edge in anticipating poor unemployment numbers.
One of the stocks I am considering for purchase is Costco, which caters to more affluent customers than Sam’s Club. Dollar General, Genesco (GCO) and Tractor Supply (TSCO)–all three based in Nashville–are also candidates for purchase.
I like investing in retailers because you can keep your finger on their pulse by visiting their stores and watching how their same store sales numbers are progressing every month. I worked for Home Depot (HD) from 1997 to 2000.
Another stock under consideration is Simon Property Group (SPG.PJ), an owner of shopping mall properties. One of the stocks held in a couple of the models I manage is T J Maxx, which is owned by TJX Cos. (TJX). I mention it because it provides a fun shopping experience.
The company calls it “a treasure hunt experience.” I was there twice this week. It is amazing how fast the check-out lines move at T. J. Maxx.
Whole Foods (WFM) is another retailer that I’ve owned and might buy again that provides a fun shopping experience. My wife is trying to get me to reduce the number of times I go to Costco each week. Costco must be fun, too.
