Vincent Shen: I want to make sure
we have time to cover Walmart.
I feel like this is a gold standard
for a consumer staples retailer.
Going back to 2008, that year and I mentioned
and the lead-up to the financial crisis,
the lows reached during that time,
the S&P down 40% for the year.
Walmart was actually up 18% that year.
Just a single data point for you to consider.
More recently, this is a story that I think
shares a lot of similarities with McDonald's.
Management's focused on
growing its e-commerce arm.
They're focused on investing and acquiring
all these new businesses and taking generally
more market share.
It's a long-term focus that I like to see,
even if it means that there's going to be
a near-term hit to profitability
in the next fiscal year or two.
It's a focus that seems like management at both of these
companies -- McDonald's and Walmart -- are taking on.
I think it'll be good for shareholders
looking out five, ten years and further.
What are your thoughts here?
Asit Sharma: Longtime listeners will remember
that we devoted an episode to Flipkart,
which was Walmart's great
e-commerce acquisition.
That's the up-and-coming
e-commerce online operation in India.
One thing that's really caught my eye since
that show is Walmart's attention to, again,
millennials and Gen Z.
It's invested in a number of brands.
I'll read a few. Bonobos,
ModCloth, Moosejaw and ShoeBuy.
These are non-traditional
categories for Walmart.
It's investing where millennials are shopping
and in the brands that millennials like.
It's also really ramped up
its own private label offerings.
Fashion turns out to be a large opportunity
in the economy in good years and bad years.
Walmart, in doing this, is extending beyond
that brick-and-mortar, away from what jet.com,
another acquisition, brings it, which is a quasi-competitor
to Amazon, and more of an individualized,
standalone concept with each
of these brands that it acquires.
It's diversifying that base out.
Of course, when your revenues are in the
several hundreds of billions of dollars a year,
it takes a long time for an effort
like this to provide diversification.
But we've seen it acquire delivery companies, logistics
companies, waging this multi-front battle with Amazon.
I would urge listeners to look beyond Amazon
to a future where retail stores still exists,
consumers are still going into Walmart stores
and buying products which you today might
not associate with this company.
I also wanted to note, in the most recent
quarter, Walmart's U.S. comps rose 4.5%,
which was the best
performance in ten years.
I believe they're reporting results on the
15th of October in just a few days.
We'll get to see if that trend continues.
It's a long-term classic defensive play, but again,
there's a growth story in here that's starting to emerge.
Shen: Thanks, Asit. We have like two more
minutes, so I want to give you an opportunity.
With this broad conversation that we've had
on the idea of consumer staples as defense
during market downturns, what's a big
takeaway you want to leave our listeners with?
Sharma: The biggest takeaway, we really haven't
mentioned this, but it's probably a question
that many listeners have
as we pull to the end of this show.
If I buy these stocks tomorrow,
am I just going to suffer another big downturn,
as I have with other
names in my portfolio?
My answer is, we might.
You never know how low the
market can go when there is a bear market.
However, each of these companies
is grouped around 21X forward earnings.
That's fairly cheap, given today's market.
The only outlier is McDonald's, which is
trading at 24X one-year forward earnings.
Take TJX, even with its 42% rise, it's still comparatively
cheap when you look at the broader market.
You have some true
defensive muscle in here.
I would urge listeners to explore these and
other big quality staple stocks in more detail,
and maybe start nibbling,
adding some defensive positions to their portfolios.
Shen: Reiterating some of the warnings that
we had, the takeaways that we had when we
talked about what's driving the recent volatility
-- this was two weeks ago on the show.
Panicking: not the right move.
Selling out of everything: not the right move.
You're in a position right now
to think about your portfolio.
If you're worried about something like this,
like a downturn, consider: am I diversified?
If you're not, these are the kinds of sectors and
companies that you can look at to help bolster things.
That's just one of many
routes that you can take.
