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Another Over-Reaction

02/22/2018

Nobody is smarter than the market . . . but sometimes the market is stupid.

Two days ago, Walmart stock had their worst daily drop in 30 years, dropping over 10%, based on an unexpected squeeze in profit margin and a disappointing increase in the growth of online sales, which has increased 50% for each of the three previous quarters but only 23% last quarter.  This is the only company that has a chance to compete with Amazon, and it stumbled slightly.  (Some buyers call it a cheap way to buy Amazon-like market opportunity.) 

FYI – online sales are only 4% of Walmart’s revenue.  There is every reason to believe their online sales will continue to rise dramatically and faster than Amazon’s sales when it started.  (WMT just announced they will begin offering furniture online.)  More importantly, their same-store brick & mortar sales are still rising better than 2% annually, which is considerably above trend for retail.

I’m not selling any Walmart stock.  The market did what it does best . . . it over-reacted!  And, that’s stupid!

Only semi-related, I have two words for Amazon, which recently bought Whole Foods and just announced their entry into healthcare . . . those two words are General and Electric . . .

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