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Macke On Wal-Mart: "Two Strikes"


Did Wal-Mart lose its status as a best of breed stock, on Thursday?

For months Jeff Macke has been telling you the only stock he likes in the entire retail sector is Wal-Mart . With the economy in a tailspin and looking worse by the day, Macke thought this company seemed almost destined to come out a winner.

After all, it only stood to reason that shoppers would seek out their low prices. And with so much under one roof, it had a convenience thing going, too.

But on Thursday Wal-Mart’s signature smile was anything but sunny. The nation’s number #1 retailer posted disappointing sales and they cut their outlook for quarterly earnings. (Sales were up 1.7% but analysts were expected 2.8%)

The news took investors by surprise and shares plummeted. According to CNBC’s Margaret Brennan it was a shock that they missed at all – not the degree to which they were off.

Wal-Mart blamed the shortfall on the weak economy and winter storms during the key holiday shopping season. The company also said weak sales of general merchandise had a greater negative impact than usual.

So what’s Macke view on Wal-mart now?

"I’m starting to see some chinks in the armor which is concerning," Jeff Macke now says. Wal-mart has also guided down twice and they didn’t handle the Lee Scott transition well. That’s two strikes. I’m in this stock as an investment and if they screw up again on a fundamental basis, I’m gone!"

And how about the other traders?

"If you’re on the sidelines, this might be an opportunity to get in," counters Pete Najarian.

"I also think you can get long Wal-Mart," adds Guy Adami. "The valuation spread was just narrowed."

What do you think? Tell us now.

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Trader disclosure: On Jan. 8th, 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 (POT), (WMT), (TM), (MGM); Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Najarian Owns (CSCO), (FCX), (MSFT), (ELN); Najarian Owns (XME) Calls, (NVLS) Calls, (NVDA) Calls; Najarian Owns (FCX) Short Calls; Najarian Owns (EEM) Long Call Spread ; Najarian Owns (ERTS) Long Call Spread; Najarian Owns (MSFT) Short Calls; Seymour Owns (AA), (BAC), (EEM), (F), (TSO); Seymour's Firm Owns (VIP) with wires