In July, Wal-Mart had said that its customers were increasingly unable to stretch their paychecks to the next payday. That cautious tone caused Mark Miller, an analyst at William Blair & Co., to downgrade shares of Wal-Mart to "market perform" from "outperform" based on expectations for slower sales and profit growth in the second half.
In a note to investors, he said that Wal-Mart's July sales performance was a "material deceleration" from the previous two months. Still, he believes the company is on track to meet or exceed Wall Street's current expectations for second-quarter earnings of 84 cents per share when it reports results on Thursday.
I like Wal-Mart, says Jon Najarian on Fast Money. And the large volume of call buying in this stock would make most investors feel positive. But I don’t think now is the time to buy. The recent upside mainly comes from interest in their dividened (not from stronger-than-anticipated sales.)
However, I see real optimism in both Home Depot and Lowe’s , Najarian adds. There’s very strong call buying in Home Depot. And I’ve noticed positive institutional buying in Lowe’s. The retailer I don’t like is JC Penney, he adds, I see put buying that appears to be negative.
Retail is a suckers game right now, adds Jeff Macke. If you must trade retail I don’t think Wal-Mart will do anything to break down and Costco seems to work higher no matter what.
The Bottom Line: Don’t misinterpret the positive options trading around Wal-Mart. It speaks to the dividend more than anything else.
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Trader disclosure: On Aug 12, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (WMT), (COST), (MSFT), (UUP), Macke Is Short (TM); Adami Owns (AGU), (C), (BTU), (GS), (INTC), (NUE), (MSFT); Pete Najarian Owns (AAPL), (NVDA), (TSO), (AMLN), (HD); Pete Najarian Owns (CSCO) Calls; Finerman Owns (GS); Finerman's Firm Owns (GLNG), (JCP), (MSFT), (SUN), (TSO), (VLO); Finerman's Firm Is Short (WB), (XLF), (BBT), (COF), (IYR), (MDY), (SPY), (IWM), (IJR); Finerman's Firm Is Short British Pound; Finerman's Firm And Finerman Own (PDE); Finerman's Firm And Finerman Own (C) Leaps
Jon Najarian Owns (LOW) Calls