Key Points
- $1000 invested in Walmart at IPO would be worth $3.02 million today.
- AI stocks are booming and if you’re looking for more stock ideas, make sure to grab a copy of our “The Next NVIDIA” report. It features three top AI plays, one of which could be a dominant software stock in AI with 10X upside potential.
No matter how conservative our investing philosophy is, we all hope to find a stock that can turn a small investment into a million dollars or more. Many value investors will look to stocks like Walmart Inc. (NYSE: WMT), and with good reason.
I’m not here to tell you that Walmart’s best days are behind it. The company is leaning into automation and artificial intelligence (AI). And through its Walmart+ business, it’s become a significant player in the online and digital space. Plus, Walmart is a dividend king that has increased its dividend for 52 consecutive years. The blue-chip stock merits a place in any portfolio.
But if you’re looking for the next millionaire-maker stock, you may want to look at another retail stock, TJX Companies Inc. (NYSE: TJX). This stock has outperformed WMT stock over the last five years but has a market cap nearly five times lower than Walmart.
Why Does Value Investing Work?
Warren Buffett is a legendary value investor who’s attributed with saying his preferred time frame to own a stock is forever. Some of Buffett’s investments include stocks such as Coca-Cola (NYSE: KO) and Visa (NYSE: V).
But the question is why does Buffett choose these stocks and others like them? The answer is, in part, that both stocks are deemed defensive stocks. That means that these are companies that offer products and services that are in demand in good economic times and bad.
The companies also pay attractive dividends which increases an investor’s total return. A stock’s total return includes both stock price growth and reinvested dividends.
And because of their consistent performance, these stocks deliver for investors year in and year out. That’s how investors can turn thousands of dollars into one million or more.
TJX Stock is Capturing Precious Retail Dollars
The retail sector has been showing little to no growth over the past year. In fact, adjusted for inflation, retail sales are negative. Higher prices and higher borrowing costs in the form of interest rates are taking their toll on discretionary spending. Walmart has been a beneficiary, but TJX has also been outperforming the sector.
TJX is the parent company of many brands including TJMaxx, the retailer that is a favorite of millennial and Gen-Z consumers who are looking for treasure hunt bargains. The company also has a business model that provides shoppers with a clear good, better, best value proposition. And even when the rate of inflation was much higher, the company still showed it could capture discretionary dollars.
But if you’re looking for a millionaire-maker stock, the question is where can TJX stock go now? The answer comes down to one word: expansion. On its recent earnings call, TJX chief executive officer, Ernie Herman announced the company’s plans to open 1,300 new locations not only in the company’s existing U.S. and Canadian markets but in Europe and Australia as well. Once that expansion is complete, the company would have over 6,200 stores, an increase of more than 26% to the company’s total footprint.
When in Doubt Out, Zoom Out
Over the last five years, Walmart has delivered a total return of 98.98%. That means that $1,000 invested in WMT stock five years ago would be worth $1,998.98. However, TJX stock has been an even better performer with a total return of 115.25%.
TJX stock is up 21.8% for the year with most of those gains coming since the company last reported earnings in May. At that time, the company reported year-over-year earnings growth of 22%.
At 27x forward earnings, it’s hard to make a case that TJX is undervalued. Analysts give the stock a consensus Buy rating but suggest that the stock is fully valued. However, on July 3, Loop Capital reiterated its Buy rating on the stock and increased its price target from $115 to $125.
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