I am very intriqued by our top 2 choices for the "Pooring of America" trend - Walmart (WMT) and McDonalds (MCD) - what exactly are the charts above telling us? Feel free to chime in with comments. If we are to enter a long drawn out recession, which I have believed - these seem to be screaming buys here. The only question is credit - how does a lack of credit potentially hurt both. They are not expanding a ton in the U.S. at least - perhaps with Walmart its financing of inventory but I cannot wrap my mind around this behavior.
It is however another part of the bottoming process when the places people are hanging out as safety get destroyed - we saw that at market bottoms in January and March 2008 as well. In fact McDonalds is all the way back to January 08 lows.
My possibilities are
- Mutual fund redemptions - these are huge holdings of hundreds upon hundreds of the largest type of "large cap" mutual funds - as retail investors panic and redeem from mutual funds - the funds have to sell to raise cash
- Some sort of credit issue
- 'End of Days' in the US economy as people cannot even afford the bottom of the proverbial food chain (worst case)
- Their weakness is a precursor for a roaring economy in 6-9 months (i.e. as everything recovers people will begin to shop back upscale) *cough* doubtful but I'm putting it out there (best case aka the Dennis Kneale aka perma bull reason)
No position but thinking this might be "the" opportunity for these two
11 comments:
I was wondering the same.. for MCD (not sure about WMT), it was getting growth overseas. Now that the overseas growth is dead, its own growth is getting hit. That's one part. the other part, is that its just puking along with everything else.
but is there a "bottom of the barrel" US levered stock? I know 12 months ago, it was all - "want more international than domestic". Now its the other way around - at least when it comes to "pooring of the world" stocks.
I think people really are just that poor right now.
My pick of these 2 would be Wal-Mart because they also have a grocery business. When everything goes bust and people are eating as cheaply as possible they can still buy their food at walmart. McDs will seem like a luxury item at that point.
I agree, but MCD should have a stable dividend.. at this price, it should start to get support. WMT doesnt have that yet. If the yields were comparable, id go with WMT too.
Michael,
Great point on the grocery angle - really sets it apart from Target and Kmart aside from its discount merchandise. I read it has become the largest grocer by some measure in the US
On the other hand arent plummeting commodities costs going to help MCD? If we find the $1 value meal to be a luxury we really are in trouble and it would not explain the strength in airlines ;) hard to justify $350 tickets when $5 meals are off the table
RMJ, welcome back - thought we lost you in the Canadian winter... err, summer. Or something. Yes it is ironic - 10 months ago we wanted overseas exposure, now we don't. Remember I said then, when that "switch" happens we are going to be left with companies that are strong in the US only - and that would be good how? Considering how bad the situation is here? So its sort of laughable.
*1. Mutual fund redemptions*
thats the one... it aint hedge funds selling this week... its the Fidelities....
thanks mark.. good to be back. i havent been blown out of the game... YET.. but im all covered in blood.
I've found that technicals work like daily charts use to, if for recessionary stocks, you use the hourly chart. and commodities, you use a 15 min chart!
yes - lower commodities really should be helping MCD. so that I dont quite get.
yup, possibility #1. read something like $52 billion withdrawn from mutual funds as investors panic. those 2 names are gravy names in any mutual fund.
agree with the comments re: WMT grocery store, as well as the MCD declining input costs. I actually think they're both solid plays. all the WMT's ive seen have been absolutely packed, and MCD's ridiculous lines at drive-thru
like them both here because they should have strong fundamentals in this environment. buuuuut since fundies got thrown out the window a long time ago, that doesn't matter haha
WMT at 42 is a no-brainer to pick some up if it gets that low
"thats the one... it aint hedge funds selling this week... its the Fidelities...."
Because Cramer told them to! LOL
TM,
The other thing with Wal-Mart over McDs is that you can also buy your guns and ammo there if it gets to that point. :p
I think these are two very common stock invidiual investors would own. I really don't think people *need* the $, just want to stop losing here. I feel the energy prices are much more of a concern to the average joe than the stock market health in general. Does main street care GS lost 70% of value, doubt it but they do care gas is @ $4.00 or bread/milk are up. so..... i think those two stocks would be still relatively ok but everyones #'s are going down.
MF,
Let me know when it hits $42
I have so many stocks in "must buy" mode but I won't buy them I can't keep track
Michael, good point on NRA issue - now i need to kidnap someone who knows how to fire one.
I also thought this market cycle will bottom in 09 or 10 when Cramers show got cancelled - due to viewership - i.e. there will be great apathy towards the market. But he was just resigned about 5 months ago for a new 4 year stint so I guess I cannot use that as a tell.
MF, if you read this look at MYLAN! That was supposed to a safe generic drug stock - scary
very scary
Not sure if I agree with the Walmart over McD just because it has a grocery section. I used to manage a lot of units in San Jose and we had a lot of section 8 and lower middle class families. They eat fast food as a life choice. And they are into convenience. They don't drive to Wally World to stock up if there's a McD or Pizza Hut nearby. As more families lose jobs and homes, I'd expect that dollar menu to be more of a draw than a 24 count case of canned tomatoes.... Could be wrong though.
I did buy McD today at half my normal dollar value.. I'm up 8%. Probably should have turned it in the last 1/2 hour..
Interesting that that the eateries, grocers and GIS all seem to have the same trajectory.
jegan
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