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The Bears Are Wrong About This 'World Dominator' Today
By Justin Brill
Saturday, March 3, 2018
 It's been a tough couple of weeks for Walmart (WMT) shareholders...

On February 20, shares of the retail giant plunged 10% following its fourth-quarter earnings report. An unexpected slowdown in growth of online sales, as well as weaker-than-expected guidance for the coming year, led to the decline. As news service Bloomberg reported...

Walmart fell the most in more than two years after delivering a disappointing annual profit forecast, sparking fears that its bid to catch up with Amazon.com online is losing momentum.

The world's largest retailer expects earnings of $4.75 to $5 a share this fiscal year, excluding some items, compared with an average Wall Street estimate of $5.13. Though Walmart's sales last quarter topped projections, the results reflected a slowdown in online orders – a key metric in its battle to fend off Amazon.com...
 
The panic continued the following day after a report that Marc Lore – the head of Walmart's e-commerce division – planned to leave the company. Lore denied the news, but Walmart shares fell another 3% that day, ending the week down more than 11%.

 Longtime readers know Walmart was one of Dan Ferris' original "World Dominator" recommendations...

Dan first recommended shares to his Extreme Value subscribers in October 2006. Folks who followed his advice went on to safely double their money or better over the next several years – a period that included the financial crisis and the worst bear market in a generation.

He officially closed that recommendation in February 2015. Shares had become richly valued and were trading at an all-time high. He didn't believe they would continue to appreciate at the same near-double-digit rate they had to that point.

Dan was exactly right... Walmart shares fell as much as 35% over the next nine months, and were "dead money" for years as valuations came back to earth.

 So you may be surprised to learn that Dan re-recommended Walmart last fall...

He told his Extreme Value readers that shares were once again trading at an attractive valuation. As he explained in the October issue...

The current share price assumes about 1.5% annual revenue growth for years to come. That's too pessimistic. Walmart projects 3% revenue growth this year. It will likely surprise to the upside in future years as customers engage online and in store, leading to higher sales per customer.

Walmart trades for around 15 times trailing 12-month [free cash flow]. That's plenty cheap for the No. 1 retail dominator...

 In addition, after it had struggled for years to "figure out" e-commerce, Dan said the company was finally on the right track...

Rather than try to compete directly with Amazon (AMZN) online, Walmart now intends to become a true "omnichannel" retailer. More from Dan...

The popular viewpoint is that all retail is going online and that brick and mortar is going out of style. That is false. Roughly 90% of all U.S. retail sales are still in stores.

Online retail is a rarely profitable business. What's really happening to retail is more subtle...

It's transitioning from pure brick and mortar and pure online to omnichannel. This is where a retailer engages you online, using the Internet as a dynamic, up-to-the-minute catalog and an ultra-convenient service kiosk to then get you into the physical store.

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---------------------------------

 Amazon appears to understand this, too...

That's why it has been adding physical locations. But Dan said Walmart still has a huge advantage here...

Like Amazon, Walmart can deliver to 99% of U.S. households within two days with its existing logistics infrastructure. But Amazon can't come anywhere close to matching Walmart's tremendous store density... Roughly 90% of the U.S. population lives within 10 miles of a Walmart location.

As of its fiscal 2018 second quarter, Walmart operated more than 5,400 flagship supercenters, neighborhood markets, and Sam's Clubs in the U.S. Outside the U.S., it operates another 6,250 stores in 27 countries. Combined, these 11,600-plus stores account for more than 1.1 billion square feet.

That's roughly 10 times more physical store space than Amazon has. Walmart's real estate holdings are massive, dwarfing Amazon's still-substantial 97 million square feet of fulfillment centers, data centers, and "other" real estate.

I expect Walmart can and will quickly grow its online technical prowess to match Amazon's. But I doubt that Amazon can build anything comparable to Walmart's substantial real estate holdings.

 In other words, Dan believes folks who are only focused on Walmart's quarterly online-sales figures are missing the bigger picture...

So you likely won't be surprised that he thinks those who sold shares in a panic last month were making a mistake. As he explained in a recent update to Extreme Value subscribers, the company's earnings report featured plenty of reasons for optimism...

For the first time in corporate history, revenue exceeded $500 billion, largely on the strength of its U.S. Walmart stores.

Comparable store sales (also referred to as same-store sales) were up a strong 2.6% in the fourth quarter. On a rolling two-year basis, this was the best comp sales growth for U.S. stores in the last eight years.

And again, he believes the concerns about slowing earnings and online-sales growth are overblown. More from the update...

Walmart doesn't issue guidance for consolidated operating income (revenue less cost of goods sold and operating expenses). But it reported a decline of 28% year over year for the fourth-quarter 2018. The decline garnered significant attention from analysts during the quarterly conference call.

Management attributed most of the decline to several one-time factors, like closing 63 Sam's Club stores and shutting down the underperforming in-house Brazilian e-commerce operation...

Importantly, the operating margin for U.S. stores – the segment accounting for 64% of revenue and more than 70% of operating income – continues to hold up well in the face of relentless competitive pressure from Amazon. Management contends that consolidated operating income would have actually risen year over year without the one-time items...

In short, many Walmart investors have been in panic mode this week. But the sky isn't falling on this World Dominator. If the volatility continues, we recommend you take advantage of it.

 Dan thinks investors will do extremely well in Walmart shares over the next several years... But it's not his favorite opportunity for new money today.

You see, Dan recently discovered a brand-new stock with more potential than anything else he has recommended in his decades-long career. He says it's the kind of opportunity that comes along once or twice in an investing lifetime... if you're lucky.

Dan tells us he would bet every penny he owns that this recommendation will become the top Stansberry Research recommendation of all time. In fact, he expects this new recommendation will easily return 20 times your money over the long term, with virtually zero risk to your capital.

That's a bold claim... But if you know Dan like we do, you know he wouldn't make it if he didn't have substantial research to back it up. Click here to see for yourself.

Regards,

Justin Brill

Editor's note: Dan recently found a stock that he says he would put every penny of his life savings into... one that he believes could become the first 20-bagger in Stansberry Research history – turning every $5,000 stake into $104,750. Get all the details right here.
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