Buy the Dip
Commonstock Post:
Bear with me (no pun intended) as I write this post because it is my first time and I still consider myself an amateur investor.
As a recession looms in the near future as inflation has reached 9.1%, the highest level we’ve seen since 1981, but one of the positive outlooks is that stocks are currently cheap in this bear market and securities that are able to be resilient during the recession and recover post recession could post good, positive returns.
While I considered recommending a utility stock or a healthcare stock, I settled on consumer stocks because while people may spend less during a recession, they still purchase relative cheap, neccesary goods for their household. Then as the economy recovers and their purchasing power is strengthens, they often continue to spend on consumer items and may even purchase more goods then before as their real wage recovers.
So that brings me into my recommendation of buying Walmart ($WMT) because of its low cost and low priced model that it brings to its customers. During recessions, consumers tend to spend less on luxury goods and more of basic, necessity goods for their households and that is where WMT comes in.
With a beta of ~0.52, WMT has proven itself to be resilient to economic pressures whether due to an economic downturn or increased competition for market share. During the Great Recession, while the S&P was down as much as 40%, WMT managed to be down 1% and instantly recovered and continued to grow as the Great Recession passed.
Additionally, when Amazon threatened to seriously harm Walmart’s presence in the retail industry during the late 2010’s, WMT responded well by increasing their online presence and eventually overtook Ebay as the 2nd biggest online retailer based on sales after only Amazon. So with a strong brick and mortar and online presence, WMT offers a strong Omni channel experience and product mix that connects them with all kinds of consumers no matter their shopping preferences.
At the moment, WMT’s stock price is ~$127.05 and is down ~9.75% compared to its price one year ago. WMT has suffered from supply chain issues and high operating costs as food and fuel prices have drastically increased. These are industry wide issues that not even WMT are safe from with their low cost model. However, WMT does have positive outlooks as their advertising business, e-commerce presence, their logistics networks continue to expand, and they still managed to beat consensus revenue estimates in their first quarter earning for this year. Furthermore, inflation cannot surely be this high for forever (fingers crossed), so I recommend a buy for Walmart as I believe they will recover well from this economic downturn and their stock is trading at a discount. Consensus analysts have a median target price for WMT at $155.00.
Superb choice here, a fun and succinct read. Some advice I gave to someone else, might be a good idea to pop a profile photo on your account for visibility :)