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Friday November 11, 2011
Wal-Mart: Bargain-conscious buy
by David Sandell, contributing editor The Complete Investor It’s not surprising that in today’s difficult economy, most consumers have become increasingly bargain conscious.And no discussion of low-end retailing can ignore industry giant Wal-Mart (WMT). With a market cap of $180 billion, Wal-Mart is the rare stock that ended 2008 with a gain (up 20% compared to the S&P 500’s 37% loss), an amazing feat in view of the economic headwinds. Offering low-cost products delivered via an efficient business model, Wal-Mart is a natural draw for cash-strapped consumers. The massive stores serve as one-stop shops, where consumers can buy everything from food and medications to clothing, TVs, appliances, and more—again, a big advantage in an era of high gas prices. The strategy is paying off as cost-conscious shoppers continue to flock to the store. Wal-Mart shares held up during the recent market volatility and should outperform if the economy remains shaky or deteriorates further. Despite the company’s defensive characteristics, shares are cheap at less than 11 times next year’s earnings. With many rural markets already served by the company’s superstores, the retailer is now targeting urban markets. If it’s successful in opening smaller stores in more densely populated areas, earnings growth could easily hover in the low teens for the next several years. Yielding nearly 3 percent, this retail stalwart is appropriate for just about any portfolio. In recognition of its strength and staying power, we are shifting it this issue to Growth Portfolio’s Low-Risk/Hedge segment. Learn more about this financial newsletter at Stephen Leeb's The Complete Investor. 
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