Best Stock to Buy and Hold Forever: Walmart vs. Amazon
Key Points
Walmart's pivot to groceries has helped fuel its growth.
Amazon is a relentless innovator.
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When it comes to retail, few companies are in the same league as Walmart (NASDAQ: WMT) and Amazon (NASDAQ: AMZN). Both companies have shown the ability to adapt and evolve, and they remain two of the top names in the retail space.
I think both stocks should be solid performers over the long term, but if I could only buy one and hold forever, there is one clear standout. Let's look at the merits of both.
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Walmart: The grocery leader
Walmart's smartest move this century, when Amazon began disrupting its general merchandise business, was pivoting to groceries. Walmart is now the largest grocer in the U.S., and its grocery offerings have become the staple of its Walmart+ same-day delivery platform. The combination of convenience, higher-quality selections, and low prices has also helped attract more affluent customers, helping propel its sales in the past few years.
The retail giant has also taken some pages out of Amazon's book, with it seeing robust e-commerce growth. Walmart is also leaning into digital and in-store advertising, adding another high-margin layer of growth.
Amazon: The constant innovator
Amazon has a dual growth engine with its e-commerce and cloud computing businesses, and it's also got some other growth projects up its sleeve. The company's e-commerce platform continues to hum along, and the business just gets more efficient with the company's robotics and artificial intelligence (AI) initiatives. Amazon is also looking to take this strategy into physical locations to directly challenge Walmart.
Dubbed Project Kobe, Amazon is poised to introduce Walmart-style supercenters that will be powered by AI and robots. This is still in its early stages, but it's another demonstration of Amazon's commitment to innovation. At the same time, the company is still working on ways to speed up delivery, including with drones. It is also launching a satellite internet platform called Amazon Leo, showing the company doesn't plan to sit still.
Amazon's second growth engine is cloud computing. Amazon Web Services (AWS) is the largest cloud provider on the planet, and the company is investing aggressively to capture the need for computing power stemming from AI. It's also developed its own custom AI chips, which can give it a cost advantage in this area.
The winner
The clear winner to own for the long term, in my view, is Amazon. The company is a relentless innovator, which is something I want to see in a very long-term investment. On top on that, the stock is much more attractively valued, trading at a forward P/E of 27.5 times, compared to nearly 44 times for Walmart, while growing more quickly.
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Geoffrey Seiler has positions in Amazon. The Motley Fool has positions in and recommends Amazon and Walmart. The Motley Fool has a disclosure policy.
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