Analysis: LIN WMT AMZN

After you receive this Alert we will be buying 100 shares of Linde Plc (LIN) at roughly $250.03. In addition, we will be buying 50 shares of Walmart (WMT) at roughly $137.92. Following the trades, LIN and WMT will represent 2.05% and 4.52% of the portfolio, respectively.

Let's start with Walmart first. The stock is only fractionally recovering from the ~6% selloff yesterday that occurred in connection to the company's fourth-quarter earnings report and tepid outlook that you can read about here.

But before we talk about what just happened to the stock of Walmart, we want to bring up one moment in the company's rich history that yesterday reminded us exactly of.

Back in October 2015, Walmart slashed its long-term earnings forecast after management quantified their investment in wages ($9 to $10 per hour) and said they planned to spend over $30 billion in capital investments between fiscal years 2017, 2018, and 2019 to strengthen its U.S. and e-commerce business and position themselves for the future. This lowered outlook was a shock to the investment community and shares of Walmart plummeted by about 10% that day to $60 per share, and CEO Doug McMillon went on Mad Money that evening and defended his strategy of how this was "offense" in a legendary interview you can re-watch here.

WMT started to rally after bottoming out about a month later as management executed their plan and investors began to embrace their strategy. Exactly one year later WMT traded at about $70 per share, and two years later it was in the mid-$80s, proving that the sellers who feared Walmart's investment cycle got it flat out wrong.

We bring up this story because the events from yesterday should sound familiar. Walmart said Thursday that capital expenditures are going up to ~$14 billion (from $10.3 billion in FY21) as the team invests in the supply chain, automation, customer-facing initiatives, and technology. Management also announced an investment in their people and will be raising the average wage to a level over $15 per hour. CFO Brett Biggs said yesterday "these investments should put us in position for 4 plus percent sales growth and operating income growth rates higher than sales." Then when you factor in a steady diet of share repurchase (and a new $20 billion program was announced), what you will find is a path towards high-single-digit percent earnings per share in the future.

Like we said yesterday in our earnings write-up, this is a long-term transformation that will enhance Walmart's leadership position in commerce. Investments in areas such as the supply chain, automation, and technology will allow Walmart to differentiate itself as the one retailer that started as a bricks-and-mortar operation that has transformed in such a way that it can compete head to head with the likes of Amazon (AMZN) in e-commerce while gain market share over its bricks-and-mortar competitors.

If the selloff in Walmart yesterday turns out to be another 2015 moment again, we will regret not buying even more stock here and that is why we are again adding to our position.

As for Linde Plc, we are simply scaling deeper into our newest position. You can read more about LIN in our Alert from Thursday here.

Action Alerts PLUS, which Cramer manages as a charitable trust, is long WMT, LIN and AMZN.