Wal-Mart (WMT) shares returned 1.5% during the second quarter of this year, which is the most recent reporting period for big investors. This beat the S&P 500 by 2%. Wal-Mart’s stock has been notorious for going nowhere for the last decade. As of August 31, the last 10 years have seen an 11% gain. This compares to a 283% gain in the previous 10 years. The stock is arguably cheaper than it’s ever been. Revenue has grown by 10% per year in the last decade and free cash flow has grown by 22% annually. It has also held up well since the end of Q2. The S&P 500 is down more than 7% in that time period while Wal-Mart is up more than 1%.
The stock is already widely held. That and the huge market cap make it difficult for the stock price to move quickly. Most value investors are aware that Warren Buffett is a big fan, holding more than 1% of the outstanding shares. He hasn’t done anything with the stock for the last few years. In the last quarter we did see a bit of activity, though, from some smart investors. Let’s take a look at some of their portfolio changes.
First Pacific Advisor is run by Robert Rodriguez and has nearly $17 billion under management. The firm offers six mutual funds as well as separately managed accounts for high net worth individuals. Steven Romick and J. Richard Atwood are also managing partners. First Pacific already owned a substantial number of Wal-Mart shares coming into the quarter. First Pacific increased First Pacific's holdings by 25% and now owns about 4.3 million shares. Wal-Mart makes up about 3.3% of the firm’s holdings and 5.8% of the FPA Crescent Fund, which utilizes a contrarian investing approach.
Don Yacktman is the president of Yacktman Asset Management, a firm he founded in 1992. The firm runs two mutual funds. Yacktman has been buying Wal-Mart shares every quarter since Q3 2009. In the most recent quarter, he bought more than one million shares. His total holdings now equal about 2.9 million shares. The stock makes up 1.6% of his firm’s holdings. Yacktman tends to run a pretty focused portfolio, so Wal-Mart is only his 20th largest holding. For comparison, Yacktman has a greater than 10% position in News Corp. (NWS) and Pepsi (PEP) respectively.
Leon Cooperman is on the other side of these trades. He runs Omega Advisors and has more than $5 billion under management. He launched Omega Advisors in 1991 after a career at Goldman Sachs. Cooperman sold about 38% of his Wal-Mart position in the second quarter. He now owns about 585,000 shares. The stock makes up about 0.7% of his portfolio. Cooperman also owns a few other retailers including Best Buy (BBY), Office Depot (ODP) and Lowes (LOW).
Slightly trimming his position is GMO’s Jeremy Grantham, who famously believes that we’re in a seven lean year rut and likes cash-rich defensive names. Wal-Mart is his eighth-largest holding and makes up about 3.6% of his portfolio. Grantham owns about 19.6 million shares but has been selling shares each quarter since Q1 2010. In this past quarter he unloaded 1.2 million shares, or about 6% of his holdings. Grantham’s largest holding, Johnson & Johnson (JNJ), makes up 5.8% of his portfolio.