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Tom Armistead
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I'm a well-informed retail investor and post on SA in order to expose my thought process to critical examination and comment from readers. It makes me a better investor. I'm particularly proud of bullish macro articles posted in 2009 and later, in which I presented ideas that encouraged me to... More
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  • Adding WalMart 2 comments
    Oct 31, 2013 11:12 AM | about stocks: WMT

    Today I added a position in WalMart (NYSE:WMT) to the synthetic Dividend Growth portfolio. A number of holdings, such as MicroChip (NASDAQ:MCHP), Lorillard (NYSE:LO), Texas Instruments (NASDAQ:TXN) and Raytheon (NYSE:RTN) have advanced to where the spreads are deep in the money and provide little market exposure.

    Going to Portfolio123 I ran the screener that advances candidates for consideration and started going through the prospects. WalMart is undervalued by my methods and trading well below its historical average P/E per FASTgraphs.

    Using S&P projections for the current and one future year, plus 3 years historical earnings, projected 5 year average EPS works out to $4.97. Applying a multiple of 20 for a high quality stable value stock, I get a target price of $99, compared to today's price in the $77 area. There is room for capital appreciation, and the dividend yield is 2.44%.

    Using a 15 year view, here is the chart from FASTgraphs:

    (click to enlarge)

    The stock has fallen out of favor recently, and is not commanding its previous multiples. At the current P/E of 14.9 the investor gets a dividend that is likely to increase and a stable value investment that may eventually trade at a higher multiple.

    It's a Dividend Champion per David Fish's list, with a 38 year streak.

    I think it makes a good long-term holding and is not over-valued even in today's heated market.

    Disclosure: I am long WMT.

    Stocks: WMT
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Comments (2)
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  • Tom Shaughnessy
    , contributor
    Comments (1141) | Send Message
    Tom nice write up! I wrote about WMT vs AMZN the other day, I think you may like it!



    31 Oct 2013, 03:05 PM Reply Like
  • Tom Armistead
    , contributor
    Comments (5605) | Send Message
    Author’s reply » Thanks, I checked it out, good analysis. I personally use Amazon from time to time simply because they sell almost everything and it can be done over the internet. But as an investment I say "Where's the Beef?" meaning profits.


    WalMart I don't like their attitude towrd employees, thousands of part-timers with no medical coverage, the emphasis on cheap cheap cheap, the fact that those who do business with them have trouble making money, etc.


    But as an investment their business model works very effectively, and I'm not going to let the fact I don't like their style get in the way of running my investments properly.
    31 Oct 2013, 03:31 PM Reply Like
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