Thank you Wall Street Journal for calling the bottom on Wal-Mart
Let me say at the get-go that both I and my clients own shares in Wal-Mart, so I’m anything but unbiased on this subject.
I’ve blogged in the past about how frequently the popular press reflects popular sentiment instead of reporting news that can be used to make good investment decisions. Well, here’s another example.
Today, a Wall Street Journal article by Gary McWilliams may have called the bottom on Wal-Mart. The article is titled, “Wal-Mart Era Wanes Amid Big Shifts in Retail; Rivals Find Strategies To Defeat Low Prices; World Has Changed.”
My point here is not to dispute the article’s facts or conclusions, but to highlight that stock prices are a reflection of popular sentiment. By the time “news” hits the front page of the popular press, stock prices almost certainly already reflect that “news.” I believe this to be the case here, too.
You see, everyone knows that Wal-Mart same store sales are low.
Everyone knows that Wal-Mart is perceived to treat its workers unfairly.
Everyone knows that competitors like Target, Whole Foods, Kroger, etc. have been growing more quickly than Wal-Mart.
Everyone knows that Wal-Mart’s suppliers like Pepsi, Proctor and Gamble, etc. are tired of being squeezed by Wal-Mart’s ever-present desire to wring costs out of the system.
Everyone knows that Wal-Mart pulled out of Korea and Germany and is struggling in Japan.
Everyone knows that Wal-Mart’s store expansion has cannibalized older store sales.
Everyone knows that Tesco is entering the US market and will probably compete fiercely with Wal-Mart.
I don’t think the article reports on a single piece of information that hasn’t already been frequently and widely reported in other places.
In other words, the article isn’t news, it’s simply the reflection of what everybody already knows. And, all of this supposedly bad news had already been priced into the stock.
When articles like this, summarizing what everybody already knows, hits the front page of the popular press, calling for the end of whatever or the ultimate dominance of whatever, it’s almost always a sign that things are about to reverse.
And, I believe this to be the case here, too.
The time to sell a company is not when the popular press reports that its era has passed. By then, it’s too late. You should probably be buying.
The time to buy a company is not when the popular press reports that it has become completely dominant. By then, it’s too late and you should probably be selling.
No, when the popular press decisively concludes that the end of a company’s era has arrived, it’s almost certainly the time to buy.
And, I’ll bet that in a few years I’ll be writing a blog saying that I’ve sold Wal-Mart because the popular press is reporting that Wal-Mart is back at the top of its game again.
Thank you popular press for making the timing of my purchases and sales easier.
Nothing in this blog should be considered investment, financial, tax, or legal advice. The opinions, estimates and projections contained herein are subject to change without notice. Information throughout this blog has been obtained from sources believed to be accurate and reliable, but such accuracy cannot be guaranteed.