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Scott Andrew
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I'm a log term investor with a focus on retirment. My first try at investing was in the late nineties. I was amazed at how easy it was to make money investing in tech heavy mutual funds. Then the bubble burst. What little I had left over after the dot.com bust was futher reduced by the crash of... More
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  • Six reasons to remember Walmart right now.

    Sometimes when you are looking for something it is right in front of you but you just can't see it. I'm sure most readers of SA spend at least a few minutes of time a day scanning magazines, newspapers,  or the internet looking for new equity ideas. Well, Walmart is a familiar name for most all Americans and now increasingly to more and more people outside the US. It is the largest retailer in the US. It is right there in front of us. Down the street perhaps.


    Yet why do some believe it not prudent or even cool to invest in WMT? "Conventional wisdom" tells us that competition from Dollar General (NYSE:DG), Target (NYSE:TGT), and even online retailer Amazon.com (NASDAQ:AMZN) are eating into Walmart's profits. Perhaps the image of Walmart itself is not all that attractive to some. Maybe some have simply forgotten about Walmart.

    Benjamin Graham wrote that often stocks become cheap out of pure "neglect" by investors. I believe Walmart at current price of just below $50 is a great bargain.

    Here are 6 reasons.  

    1.  Walmart is still growing. The majority of new growth comes from overseas. 24% of revenues now are from overseas and growing. Estimated EPS growth over the next 5 years is 10.41% annually according to Yahoo! Finance. This is very reasonalbe as EPS has grown at a clip of 9.65% over the past 5 years.

    2. Trailing PE is just 10.9.

    3. Walmart is busy increasing dividends. The current dividened yield  is a respectalble 2.9% and growing. Payout ratio is only 28% so there is much room to grow the dividend.

    4. Walmart is buying back shares. Why is this important? Well, if company X has 1000 shares and earns $1 on each share EPS is $1. If the company buys back 50% of its shares and still earns the same $1 its EPS has doubled to $2. Walmart has bought back an astonishing 438 million shares since 2009 according to Morningstar.com. 

    5. Return on equity (ROE) is 23.44%. That is as a company Walmart returns roughly 23% of each dollar invested in the company.   

    6. Walmart is a defensive stock. With the whipsaws occurring in the market almost on a daily basis defensive stocks provide a shelter in the storm so to speak. 

    Perhaps I'll see you at Walmart. 



     



    Disclosure: I am long WMT.
    Aug 14 10:47 PM | Link | Comment!
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