Cyclical stock: Walmart Inc.

Walmart, like Coca-Cola, McDonald’s and cherry pie, is America. 

Walmart represents how, like George Carlin used to say, America is one big shopping mall with all these large banners filled with advertising. And Walmart is a large part of it. The largest one in retail after Amazon. 

It’s actually a terribly great company loved both by consumers and investors which knows how to control its reputation better than any company out there. 

There is some decent amount of individuals who had acquired their fortune by investing in Walmart because of knowing how simple, great and powerful this company is.

This, today never ending line of hypermarkets and department stores had started in 1969 when a hustling entrepreneur named Sam Walton decided to take his business to the next level and incorporate a department store company called Wal-Mart Stores Inc.

This man had had loads of experience in this field already, previously operating or co-operating different stores like Butler Brothers which he had bought in the mid-forties. 

First ventures of this businessman had been very successful so climbing the money stairs higher and higher he had founded Wal-Mart.

This very man, Sam Walton would later become the richest man in the United States. A year after the incorporation of Walmart, Walton had taken the company public, later listed on the NYSE

After going public, the company had all it needed for its massive expansion and enterprise. Two years after the IPO, Walmart already had locations in five different states. in 1975 the company was operating in more than 120 locations across the United States. 

As the company grew, it soon started implementing the latest technology for communications.

Eighties was the decade of the most rapid company growth. Investors like Peter Lynch had made substantial profits for his Magellan fund during that time and had often recommended such simple and easily understandable companies for amateur investors during his lectures.

The company was doing fantastic, at the end of the decade it had surpassed such companies and competitors as Kmart who used to be a pretty big deal at the time. That was the period when Walmart became the largest retailer in the country by revenue.

In the 90s, as a result of rapid growth Walmart started expanding globally. First, of course, it had to get all the market share in the United States, finally getting to California. Then – offshore. 

Expanding went really quickly, building new locations in South America, going as far as Europe and even purchasing ASDA store chain in the UK. Late nineties had also been very successful for the company, it was listed in the Dow Jones Industrial Average (or just Dow 30). 

So, Walmart had become THE largest corporation in the entire world. Critics were furious.

Critics were furious because the small stores owned by single families had stopped having people over and many small businesses went bankrupt all because of the large power and market share Walmart held and still holds today. 

The company, having lower prices by a lot had started crushing Kmart which had already been having trouble with the massive debt on its shoulders and could not keep up. Hundreds of stores owned by Kmart and other companies had to close down due to the very strong competition, low margins and DEBT.

An average American household spends roughly 4,000 dollars buying products from the company. The company is known to be making 35 million every single day and receiving a new lawsuit against it almost every 2 hours. 

As you can see, the size of Walmart as of today is absolutely bonkers. If Walmart was a country, it would be listed in the top 30 in the largest GDP list. In 2010s the company had a few years which brought profits that would overthrow a mix companies like Apple, Disney, Exxon Mobil

Throughout the years Walmart had made incredible amounts of acquisitions, some of which had been really unusual for a retail or a hypermarket company. For example, a video streaming company like Vudu which Walmart had acquired is considered to be quite a unique deal. 

Also, when Netflix started emerging in the nineties and Blockbuster used to be the main player, Walmart had also tried to get into the video and TV show rental deliveries. This venture did not get so well as Netflix got ahead of the game and had thrown both of them out the window.

Video and TV show rental deliveries should not be considered and is not a big mistake for Walmart as the revenue it produces each year can beat all the flaws and make them indifferent

In 2018 the company had more than 10,000 stores operating worldwide, not including the acquired subsidiaries who also make ridiculous amounts of profit each year. The biggest competition for Walmart as of now is, of course, Amazon. The e-commerce giant obviously has a lot more advantage and experience in the product delivery field.

Amazon’s primary business, as we all know is deliveries which, especially during the time of a pandemic or any other disaster, are the go-to solution for consumer shopping and getting goods delivered in a short amount of time. 

Walmart is, like everyone else, quite aware of that and how impactful can such competition be and is massively investing in research and development and operations of product deliveries. It is just like there are two titans trying to beat each other to death by margins, low prices and best customer service.

People like Warren Buffet recently have been investing in retail stores like Kroger or Kohl’s. The problem is, these amateur corporations, however great their business models might be, are now obsolete to a such globally recognizable and super powerful company like Walmart. 

From its early beginnings, the company has been just that appealing to people. 

It sometimes even seems like a holiday or weekend destination for families, like a museum of great products which one can’t enough of.

The use of mischievous marketing tactics, like when one steps into the “health foods” section (which is not really that healthy), is welcomed by decorations like different plants and other green stuff. The man feels in nature: calm, relaxed and ready to buy some of those “green” (but sugary) protein bars. 

Even better things follow after that. 

Walking through different sections of the hypermarket it is difficult for this poor guy to find his way out. More, more and even more products are popping up and astounding his eyes. 

Now, enough of this fiction story telling. Let’s talk business, get into its financials and think about the stock for a while. As mentioned earlier, Walmart had IPO’d in 1970, a year later after the incorporation. 

During the first two decades of being traded publicly, the company did not receive that much support from the investors. However, the nineties had come and they had come with some incredible kick in the a** for the corporation. 

The company had jumped pretty high from 1990 to 1992. Then after, there was calmness and solidarity for the stock, it stayed the same for long.

Walmart stock had been trading nearly at the same price for the next five years. And then 1997 came and the company was added to the Dow Jones Industrial Average index. That resulted in Walmart stock being skyrocketed and going through the roof. 

The stock had nearly quadrupled in the next three years. Then what followed was the dot com crash which had made the stock stabilize for a long time, more or less until 2011. After that, the company had only fallen a few times, more notably in 2015 and 2018. Grew rapidly and uncontrollably after that.

Especially recently, the company had grown immensely, having quarters with more than 5% growth in revenue. Some quarters, the company had made almost 140 billion in revenue. In terms of the EPS (earnings-per-share), Walmart got an increase of around 80% during the pandemic. 

With an average 3 month trading volume of 10 million shares traded daily, WMT shall be considered quite a bit of a liquid stock. And that’s good. It’s not like there are that many long term investors, one should remember that we are looking at a cyclical stock after all.

Cyclical stock. Why? Because there are periods and times when the Walmart stock thrives and there are ones when it stays the same for extended periods of time. However, Walmart stock had recently started looking more and more like a growth stock. 

Even after these long periods of silence and stability, Walmart has shown that after a such variety of times filled with gains, profits, years of silence, low investor returns and very little movement forward, it can get what it stands for and make itself thrive once again. 

Meaning that “oh boy, that stock is growing”.

To end this lovely little section on one of the greatest corporations ever incorporated on this planet it has to be said that everybody loves the company anyways. Despite all this sketchy, annoying and filled with lies advertising, the company will always be on top as far we see. 

Nobody has a chance against such greatly established chain of one of the largest department stores, hypermarkets, etc. Amazon, of course, will always win in terms of the deliveries and Walmart is not having that customer demand for them. 

However, within the stores with the roof on, there is not a single opportunity for Kohl’s, Kroger or any other to get ahead in this battle. Kmart, as far as we all know, will not revive itself from the infinite sleep very soon. 

Walmart is one of the largest monopolies on the planet and nobody will take it apart. It is very easy to get lost thinking about its size, power and influence. 

There could be a new American state, say, floating in the water, created only by putting thousands of Walmarts close to each other. And that state would probably be larger than Texas.

Cyclical stock: Walmart Inc.

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