A first attempt at second-guessing my thesis...

I just found the following piece on Wal-Mart at one of my Pig Pen links, Random Roger:


One asked about my thoughts about the hit Walmart took during the switch to the float method of calculating the S+P 500.

If you don't know, a lot of Walmart stock came out of the index as a result of the changes. I'm not sure if the question behind the question is should Walmart be bought here . All I can say is I have no interest in the name. From a market cycle stand point, companies larger than $100 billion have lagged and I think will continue to do so.

From a fundamental stand point the growth has slowed dramatically in the last few years and I am not sure how it can ramp up again. I live in the biggest town in my county, our town has only 35,000-40,000 people and we have two Walmarts. The point being there will be no more Walmarts here.

There are many other parts of the country that are also saturated to the point that there will be no new Walmarts. Sure they can expand overseas but there might be easier places in big box retail to make money while Walmart figures out how to market bok choi and Dodger's t-shirts in China.

Hmm. Well. Um. I gotta give this one a go:

I was never looking at Wal-Mart, or Target, for that matter, as a growth stock. When I'm looking at these companies, I'm looking for a decent reward at low risk. These companies are making decent profits off of sizeable revenues. And they are not going to go the way of Clover, Ames, or Montgomery Ward anytime soon.

Regarding growth, I've found in my research that Wal-Mart is trying to expand into LA, Chicago, and NYC, but has only had success in penetrating the Chicago market. So perhaps China is the (difficult) way to go.

But I'm not so sure about Random Roger's anecdote that two Wal-Marts satisfy 35-40K people. I went on the Wal-Mart website to their store finder. I typed in a bunch of zip codes where I have resided. I have always lived in or near a major city, except for those St. Louis years. Here's what I found:

08012 - South Jersey - 1 location within 5 miles; 2 locations within 10 miles; 10 locations within 20 miles (considering the psychological barrier that is the Delaware River, there are only 5 on the Jersey side)
10024 - NYC - 1 location within 5 miles; 2 locations within 10 miles; 6 locations within 20 miles (all in NJ or LI, not exactly the stomping grounds of New Yorkers)
63130 - St. Louis - 1 location within 5 miles; 4 locations within 10 miles; 15 locations within 20 miles (okay, Wal-Mart has St. Louis covered)
19041 - Main Line, Philly - 0 locations within 5 miles; 4 locations within 10 miles; 17 locations within 20 miles.

There are lots of Wal-Marts out there, but there seems to be some room for expansion according to my small sample size.

Finally, this is not an either/or situation. I may avoid both Wal-Mart and Target, and try to find a solid discount retailer with growth potential, perhaps a nice regional store looking to go national. But I haven't found that yet. If anyone reading this has any ideas, please share them.

In the meantime, look for upcoming posts examining the strange pairing of Sears and K-Mart, Sears Holdings (SHLD) and some mocking of Mens Wearhouse.