Long WMT, Short HD, Value In IAC


Six months ago investors panic sold Walmart (WMT) and Target (TGT) and today they will panic buy them. That’s because WMT just reported a stellar 3Q22 with US comps excluding fuel +8.2% even on a tough comp of +9.2% a year ago. As a result WMT increased its full year guidance and the stock looks like its off to the races. As I said six months ago: WMT and TGT are the country’s leading consumer staples retailers and that is a good space to be for the tough economic times we’re in. The selloff was a gift as the correct bet was that both management teams would adopt and those who bought it will be rewarded today. I continue to be long both names.

On the other hand I think that Home Depot (HD) is a short as the red hot housing market rolls over with rates on 30 year mortgages above 7%. While 3Q22 results just out look fine I can’t help but think that a weak housing market will eventually cause consumers to spend less on home improvement. I have a small short position.

The WSJ’s Laura Forman has a terrific article on Barry Diller and IAC [SUBSCRIPTION REQUIRED] in this morning’s paper. IAC is a conglomerate with a lot of moving parts (big stakes in ANGI and MGM, Care.com, Turo, Meredith Corp) so it’s not easy to analyze. On page 8 of his most recent shareholder letter however CEO Joey Levin broke things down nicely. If you back out IAC’s stakes in ANGI and MGM you get the rest of the businesses for $1.2 billion. While I have not done a thorough analysis of IAC my sense is that there’s significant value here – and historically it has been right to bet on Barry Diller when he’s out of favor. I intend to initiate a small position today.

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