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Seven Reasons Walmart Has Investors Sold

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With the market in flux, keep your eye on the big discounter that's best in class.

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There are certain retailers I've started to seriously warm up to in recent months that not too long ago I had balked at. Gap, Inc (GPS) is one of them. With solid earnings prospects over the next year, it's hard to ignore.

But for the most part, my opinions on the sector haven't changed: My heart remains with the major discount chains because, in spite of what the cheerleaders claim, the average consumer will maintain a tight grip on his or her wallet. And when it comes to the discount space, Walmart (WMT) remains the predominant force and the chain most likely to be ringing the register this next year.

All that said, here are some of my other thoughts on the Arkansas-based behemoth ahead of its fourth-quarter numbers, which are due out February 18.

Walmart deserves some love because:

1. The aerial view can't be ignored. Its selection is vast, and the leverage it maintains over its suppliers is amazing and enviable, which will allow it to continue taking in the big bucks. It also has a very broad footprint, which gives it advantages that many of its so-called "peers" don't enjoy.

2.
Its stock hasn't taken off like a rocket like some other high-profile chains, however I'd wager dollars to doughnuts that in the next several years, it has substantial potential upside. I also speculate that we could very well be looking back and kicking ourselves, wondering why we didn't belly up now.

3. As far the upcoming fourth-quarter announcement is concerned, the Street is looking for $1.12 per share, but my feel is that it will come in north of there by two cents or more. Its knack for whooping estimates in three of the last four quarters give me some confidence.

4. If we were to slap a multiple of 15 on next year's estimate of $3.97 (which would hardly be unreasonable), it would equate to a more than $59 stock.

5.
Keep in mind that there were some (non-direct) insider purchases toward the latter part of last year north of $50, which scratches me right where I itch.

6. With the market in such flux, money managers look to belly up to chains like Walmart that are best in class and that have been ripping the cover off the ball.

7. I don't think this stock stays at $52 and change for long.
No positions in stocks mentioned.

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