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Sell Block: Target’s Off the Mark

Forget about investing in Target, Cramer said Thursday, and turn your attention back to Wal-Mart.

All the attributes that made Target such a great stock seem to have faded, while Wal-Mart 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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