Mad Money

The Stock You Love to Hate


Cramer’s never kept his disdain for Wal-Mart a secret. As far as he’s concerned, the stock will never have a run until CEO Lee Scott is gone. But while Cramer’s opinionated, you can’t call him close-minded. If there's a way to make money on WMT, then he's willing to listen.

What’s WMT got going for it? Well, it’s cheap. The stock trades at just 14 times earnings, with a 12% growth rate. Another Mad Money: Watch TV, Get Rich maxim: Any stock that’s trading even with its growth rate is a bargain. So as much as it pains Cramer to admit it, Wal-Mart does seem to be undervalued.

Revisiting Wal-Mart

Reasons two and three – Both traders and the media hate the stock. The two groups are making a feast of the company.

Wal-Mart is redesigning its stores now and it dropped its Quixotic banking venture, so now the company’s more focused. That’s great, but the problem is that 16 out of 28 analysts that cover the stock still like it. That’s too many for Cramer’s tastes.

WMT is putting up stores aggressively, scaling back its capital expenditures and increasing the dividend, in addition to being cheap on a PE basis, but Cramer can’t get over the fact that so many analysts like the stock and the stores are no fun to go to. The best Cramer can do for Wal-Mart is to take it from a “Sell” to a “Don’t Buy.” He likes Sears, J.C. Penney and Kohl’s, all of which are outperforming WMT.

Bottom Line: It’s good to question your opinions – Cramer questioned his on Wal-Mart. But sometimes you’re right, and he thinks he’s right to call WMT a “Don’t Buy.”

Jim's charitable trust owns Sears.

Questions? Comments?