Wal-mart stock

Wal-mart gets a lot of bad press. From what I've seen on blogs over the past year many more people post negative statements than positive. I'll buck that trend!

I like Wal-mart. A lot. More the prices than the experience but I'm often surprised at the quality also. The produce I get at Wal-mart is usually a lot better than what I can get at my local grocery stores. Unfortunately the closest Wal-mart is 20 miles away and the money I save doesn't justify the gas for routine visits so I only go every 5 weeks or so. That's fairly unusual since statistically half the families in the US shop at Wal-mart at least once a month and a quarter of those shop at Wal-mart every week.

But my purpose here isn't to talk directly about the stores, rather I'm interested in their stock. Wal-mart incorporated in 1969 and had its initial public offering (IPO) the next year in 1970. It was offered at $16.50 then and is $45 now, 35 years later.

Of course Wal-mart stock has split 13 times since then so the gain is a lot more than you'd think from that apparent tripling. In fact you'd be quite wealthy had you bought stock at the IPO and held onto it. As you can see to the left, at a split adjusted price of just pennies a share is now worth $45. So a thousand invested back at the IPO would be worth nearly a $milllion now.

Unfortunately things in Wally World stock aren't all that rosy and cheerful. The stock has been moribund for the past 5 years, moving up and down in the $45 - 65 range. Even in these days of lackluster stock performance that's not very good performance. Why do I bring this up? I'm glad you asked. LOL I see brighter skies ahead for Wal-mart and expect the stock to move past $60 in the next year.

Right now earnings are expected to come in at just over $3.00 a share this fiscal year. That gives Wal-mart (stock symbol WMT) a P/E of 15. Furthermore the dividend is healthy at 1.3% (60 cents a share). More than you'll earn in many bank accounts. That's what is going on now, in the near future the stock should rise to reflect the increasing attention to bottom line issues, often neglected recently, like improving the appearance of the stores, the style of merchandise--and area in which Target has made inroads--and making shopping at Wal-mart a more positive experience.

Will this work? Nobody knows for sure--which is why the stock market is scary to many people. But also a lot of fun! However Wal-mart has scale on its side since it's the largest grossing retailer in the world with $300 billion in sales a year and serves 138 million customers a week. Now all it needs to do is serve those customers better.

Comments

Yaeli said…
WOOHOO!!! I get to leave the first comment! We haven't got Walmart here in OZ, but I have heard lots and lots about how it drives small business owners out of business, etc. It's interesting to here a point of view from the other side of the fence.

Michele sent me today but I was going to swing by anyway. :o)
Yaeli said…
I get the second comment too!! Yay!!! Michele sent me again to give you some loving! :o)
Teresa said…
Since the Wal-Marts around here don't have supermarket sections, I can't comment on the quality of the produce at their stores. However, quality of produce would make me shop there even if it was 20 miles away. Well, maybe not, as I don't travel well. LOL

The quality of some things -- as well as the price does make it a good place to shop. The only consistant purchases we make there are dog biscuits and microwave popcorn. If I actually go to the store myself (about two or three times a year), I buy Dove chocolates too. For me, the hassle of getting to the stores prevents me from shopping.

I've only been to Target once and hated it, but then again our store isn't the supermarket type that others seem to have. I may be missing something.
Michelle said…
Stock Market is heaps of fun, but you really ned to be in it long term to make anything decent, go buy a few shares and have fun with them!
Ciera said…
you completely lost me when you started talking about stocks and stuff.

our nearest walmart is like just over 20 miles away too, so it's about a once a month trip or so.
utenzi said…
Wal-mart is the kind of stock I should buy. I've had a series of financial setbacks over the past decade so I don't even have a stock portfolio right now--but when I did the stock I'd buy and sell was anything but steady. I like risky stocks and frenetic trading. It's a problem. :-)
utenzi said…
Yaeli, you're definitely right about the small business observation. Most cities in the USA had a lot of small businesses disappear when large scale malls and shopping centers began to pop up back in the 60s and 70s but the small towns weren't as affected by this. Wal-mart's strategy was to avoid cities and locate in small towns--places that had been ignored by the large chains up 'til then. The strategy was a smashing success for Wal-mart but not for the small shops in those towns.
yellojkt said…
Here in Maryland Wal-mart stopped a law that would have made them provide better health insurance benefits to their workers. It seems wages are so low, many employees qualify for Medicaid which drains the state treasury. The book Nickled and Dimed also has a chapter on the aggressive labor tactics they use to prevent any organizing by employees. Life at or near minimum wage is very tough.
utenzi said…
All true, Yellojkt, but from the ownership perspective it's better for profits to pay your employees as little as you can without compromising their loyalty to your company. That's a fine line to tread and I think Wal-mart has erred a little in recent years on the low side. So their employee loyalty has decreased--and the moribund stock also affects that. Back in tthe 80s and 90s stock sharing programs in which employees could buy stock in Wal-mart at slight discounts benefited them from Wal-mart's high flying stock.
Lora said…
I've lived in a couple towns that lost all their Mom and Pops thanks to Walmart and Now leave young people thinking that Walmart is a good job dispite the wage desparity and slim benefits. Not my favorite place...
utenzi said…
I hear you about that, Lora but I'm definitely of the Capitalist orientation. I don't think inefficitent companies should be supported in some sorta welfare-type state.

That's one reason I'm usually identify with the Democrat Party. While the Republicans talk pro-business and capitalism, in reality they're all about giving corporate welfare to huge corporations and that's just bullshit. Socialism not capitalism.
Jason said…
I live in the hometown area of the Wal-Mart Home Office, and let me tell you, it is nothing buy growning and getting crazy out here. :)

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