Monday, March 06, 2006

Buffett Heart's Walmart...Uh oh.

A NY Times piece today discusses Buffett's latest letter to shareholders. I have more respect for Berkshire than almost any other company on the planet. He's right 8 times for every time he's wrong and when he's wrong he knows how to cut the losers.

Having said that, the decision to buy BUD and WMT is perplexing. I think it's part of his falling US Dollar play, but I think he's year early on that call as well. I assume the call is buy Walmart and BUD b/c as the dollar falls they will extend their reach into other global markets. I understand BUD, but Walmart?

Their investor relations guys are pushing China, Mexico, India, etc as big growth prospects but how many Walmarts will they stick in upstate NY? It seems like every time you turn on the TV their is a new Walmart being discussed up here. My main question for Walmart is - if you've searched the whole planet and determined that the next great profit center for Walmart is Potsdam, Watertown or Lowville, I'm concerned.

Walmart's new supercenter in Leray will certainly enable it to get a larger share of your total budget - they can get your food money (hurting Price Chopper, Hannaford, P&C, Sam's), your general merchandise money (hurting Kmart, Walmart), your home improvement/landscaping money (hurting Lowe's, Home Depot, Walmart, Kmart) and your tire/auto money (hurting local tire/quick lube stores and Sam's). Is there a theme? While Walmart's Supercenter is clearly going to boost the total % of your expenditures going to Walmart, it will have an effect on many of the existing Walmart stores (Arsenal St, Sam's).

That's not a growth story I like. I imagine Mr. Buffett bought Walmart near it's $42 low and it might be a good holiday trade, but I question the logic of making Walmart a core holding.

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