WMT

[Sniper]

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It's a bit more helpful here. But still, not as many specific stocks discussed, as I would like.

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SO start some specific stock threads [img]/images/graemlins/wink.gif[/img]

[squiffy]

I will probably make about 10-15 separate little posts, as time permits. So please be patient.

First of all, in the long term 10 years/20 years or even ultra long term 30-40 years, WMT will be and is a great stock.

Read Stocks for the Long Run by Siegel.

Second, small investors really need to consider the short term too, because they tend to have a more limited capital inflow, a shorter time horizon, etc.

Third, before you even consider the stock's fundamentals you need to look at the short-term economic picture in America and Overseas.

Long-term WMT should do well in China. Are they involved in India? How long will it take before we see profits overseas? How much a percentage of WMT's total profit are overseas stores?

Is there much room for expansion in the U.S. or is the market saturated?

If most of the profits are from teh U.S. currently and in the forseeable short term future. Then let's focus on the U.S.

Right now, the chart has been going down? For about a year to a year and 6 months? WHY? It peaked in 2003 in what month? WHY.

First explain that to me. IF you haven't considered that. ANd if you cannot give me a plausible answer to that question. THen there is nothing further to discuss.

[squiffy]

What factor or factors most affects a stock's future price on the market? What makes the chart go up, up, up? What makes the price jump?

This is my second question for you. Just to make sure we are on the same wavelength in terms of basic theory of investing.

[squiffy]

PE is about 17, the lowest in about 8-10 years, since 1995-1997.

Long term future seems favorable with possible expansion in China. But currently most profits come from the U.S. Only 20% of profits from foreign stores, mostly Mexico.

So short term, the question is how are things in the U.S.

Why has the stock price been going down for 1 year and 6 months?

Why do you expect that trend to change?

Who does Wal-Mart serve? Who are it's primary customers? Will those customers be buying more or less today, tomorrow, the next day?

How is the U.S. economy doing? How is it likely to perform in the near future? How will that affect Wal-Mart.

If you want to buy stock in an umbrella manufacturer you might want to know the weather forecast -- will the upcoming season be very rainy or dry?

Having said that, WMT definitely looks interesting.

[JTrout]

Thank you for the time and effort you've put into this thread.
The U.S. economy has it's problems right now. Most notably is fuel cost. There is no doubt that the cost of filling up your vehicle is putting a strain on the already tight budget of the typical Wal-Mart customer.
However, this does not mean that these customers will stop shopping Wal-Mart, only that they may spend less.

Necessities will be purchased at the cheapest place in tight times.
And, too, some people that choose a higher end grocery store or dept. store may begin to spend more at WalMart in an effort to cut costs.

I grew up in a small town- with migrant workers, factory workers, middl-class folks, and upper-middle class.
And they all spend some of their money in WalMart.
I have been in dozens of different Wal-Marts, and they are always full of customers. Always.(I know, "Always" is a strong word [img]/images/graemlins/smile.gif[/img])

The main reason that WalMart has been stagnate the past 5 years is that it is reflecting what the market has done as a whole.
Walmart, and the market, were significantly overpriced 5 yrs. ago, I think most everyone agrees.
It may or may not still be overpriced- that is a debatable topic. But it's certain that much of the risk of purchasing and owning WMT (or the market) has declined in the past 5 years.

And they are increasing their e.p.s. every year.
And increasing their sales, while maintaining profit margin.
And their ROE is maintaining, even growing slightly, at a very respectable 20% or so- indicating solid mgmt.
Increasing cash flow and dividend consistently.

Their Earning Predictability is rated the highest that Value-Line rates.
Their earnings the past 12 mo. is $2.50 per share.
Their earning projection is to be at $3.00 per share in 12-18 mos., and $4.40 in 3-5 yrs.

At $44 price tag, I'm paying a forward P/E of 15 and 10, respectively, for low-risk growth of 13.5%.


Short-term= who knows. WMT is just as likely to be down as up. But coming into Christmas season, I like my chances.


I don't know why WMT has declined the last few months, and I should.
Maybe they missed earning projections by a cent, maybe some analyst put out a negative report or article and the sheep followed.

However, I look at it as a positive opportunity, rather than a major concern.

But long-term is where we have our advantage in the market, and WMT long term looks very attractive to the risk-averse investor.

[squiffy]

I am still trying to figure WMT out.
Clearly a great long term buy. BUt is this the right entry point? Not clear. What if a recession hits.

Note price has been dropping for 1 year and 6 months from high of about 62 in Feb. or March 2004. General trend is a downslope. Very strange.

Note the last official recession we had was from 3/2001 to 11/2001. Note graph during that time shows some peaks and valleys, but basically a stable, then declining price.

So even WMT hurt by recession.

Note recessions are declared late. I guess many months or even years after the fact. So not clear if we have had any recessions since then.

And even if we have no recession, I suppose we can have a down stock market, or a particular stock price can go down.

The reason I emphasize the question of why WMT has gone up and down in the past 5 years, is that to be a great stock picker, it helps to understand how the company is performing and why it is performing well or badly. Is it management, growth, the U.S. economy, the world economy etc.

If the problems are temporary, then it is a great buy and a GREAT TIME to buy. If the problems are long-term and hard to solve it may not be a good time to buy.

Sometimes a stock price will hit a 10 year low. If you buy after it hits a one-year low, this can suck.

Imagine buying KO at 60 in Jan. 2001 and watching it drop to 44 over the 4 years and 10 months to Oct. 2005. Great investment right? Great company long term, right? But short of medium term, you kissed your money good-bye. Not much fun.

If WMT is at the start of a 5 year decline in price, do you want to buy now after a 1.5 year decline in price?

You can invest at any time or for any reason you want. After 5 minutes, 5 hours or 5 days of research. But in my mind, unless you can understand the company, and it's past ups and downs, its hard to realiably predict its future ups and downs.

Note one thing from the last annual report. That some heavy selling may have been done my index funds in something like 3/05 and 9/05 due to re-weighting by the S&P 500 Index. SO that may have had some downward effect on the stock. Though how much I am not sure.

On the other hand WMT has been buying back stock, which should have helped prop up the price.

So if WMT has had such great numbers recently it makes no sense to me that it's price has been dropping while it's profits have been solid.

S&P 500 has been even or slightly down this year. Dow is slightly down. AVP, BUD, and WMT all down. I am wondering if we are in a recession now? Or whether it is a temporary down market.

I wonder if all the money pouring into real estate, which is artificially INFLATED, is part of the reason that WMT, AVP, and BUD are artificially LOWER.

I guess so far, I am very interested in WMT. I thought it was too high before and did not pay any attention to it. I am glad you mentioned it. So far it does look inviting.

It also looks pretty volatile, it seems to go down a lot in recessions and up a lot in recoveries, so a great stock if you can get the timing right.

I am just figuring out how much money to put into it and when to buy.

What worries me is that there is increasing inflation, increasing cost of the war in Iraq and Afghanistan 7 billion and 1 billion per month according to the papers, higher oil prices, etc.

So I need to understand why price has dropped so much from 60 to 44 over 1.5 years, when profits have been increasing by 10-15% per year for the past 3 years.

If it goes back from 40 to 60 again, that's an easy 50% gain in a year or so. If you have the courage to use options, you can do even better. Though I would have to really be sure of why it has gone down, before I used options.

If you cannot figure out why it has gone down, it's also hard to predict why it will go back up and when.

[Glenn]

WMT is inversely correlated to the price of gasoline. A large part of WMT's profits come from poor people spending their case money. Now that gas/heat/etc is so expensive, these people are forced to spend their case money on that. However, since the economy is not terrible and huge lines of credit are currently extended with low interest rates, middle income people have not yet been forced to step down to WMT. I like a calendar spread. The stock will do well long term but I don't expect much in the near future.

[fingokra]

WMT must be a different store in your neck of the woods. In the southern states all classes seem to buy the majority of consumer durables at WMT. It is considered a discount store but their prices are seen as how much something is supposed to cost. WMT retail here basically determines market value. Their customer base is not determined by class,here.

I contend that WMT may do better with higher gas prices because more people will choose to seek discount sellers instead of retail sellers. Also WMT has a growing interest in gasoline retailing.

[Girchuck]

But the price of fuels affects Walmart distribution networks as well.
They are already as efficient as they can be, and higher transportation costs will force Walmart to raise its prices

[buffett]

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Clearly a great long term buy. BUt is this the right entry point? Not clear.

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If it is clearly a great long term buy, why do you care about your "entry point"? Let's say that 10 years from now the stock is at $132. This is a ~12% pre-tax CAGR, excluding dividends, making your initial $10,000 investment worth $30,000. If you wait for the stock to get cheaper, let's say you are able to buy it at $40 in 6 months. Your $10,000 grows to $10,170 in 6 months (ING savings account), then you buy WMT which grows to about $33,500, about 12% higher than $30k. Of course, with dividends the gap would be a little smaller than 12%, and with a holding period longer than 10 years it would be smaller still. If it's clearly a great long term buy, I don't see why trying to get in at the chart's precise bottom is that big of an issue.
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