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All the attributes that made Target [TGT
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] such a great stock seem to have faded, while Wal-Mart [WMT
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] is reclaiming its crown as the retailer to own right now.
Cramer, among many other former fans of Target, used to talk up the store experience there, saying Wal-Mart didn’t much compare. But that scripts been flipped of late, as Wal-Mart’s locations have become fun to visit. A trip to Target, on the other hand, seems to be more of a chore these days.
Then there’s the growth story. Wal-Mart had definitely maxed out its U.S. presence while Target was just ramping up. But now it’s Target with no room left to grow in the States, just as Wal-Mart is gaining a larger share of markets overseas.
Retail’s a touchy investment in this environment anyway, but when you take into account Target’s credit-card business, there’s an added – and unnecessary – risk here for investors. Delinquencies on Target cards are up to 6.7%, the highest in seven years.
Wal-Mart’s also taken the lead in same-store sales, thanks to a focus on consumer necessities like groceries rather than just consumer wants. After all, people don’t stop eating when the market tanks. And that business is helping Wal-Mart.
A couple of other notes: Wal-Mart has a better dividend (1.6% to 1.3%, even after Target’s stock price decrease and Wal-Mart’s increase), and the retailer is less exposed to those states hit hardest housing crisis.
Plus, right now Target is trading at a lower multiple than Wal-Mart, and as Cramer said, deservedly so.
He recommended investors consider dumping their TGT holdings and switching into WMT.
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