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Why Wal-Mart Rocks For Consumers & Investors

20 May 2009 3 Comments

It’s no surprise that consumers are moving towards lower cost retailers during an economic downturn, and it’s also no surprise that companies such as Wal-Mart (WMT) have seen their earnings hold up much better than other retailers.

What is interesting is what Wal-Mart is doing these days to keep their momentum moving forward.  Interestingly, I have never shopped more at Wal-Mart than I do right now.  It seems like I go there once a week to buy everything from groceries, toilotries to beach towels.  Why not?  There is a nice store nearby, I can get everything I need in one place, and it’s tough to beat their pricing on just about everything.

In addition to having a bank, a McDonalds, an eye doctor and a nail salon inside the actual Wal-Mart, here are a few things that you might not know Wal-Mart sells:

  • Fresh groceries – While you may assume the quality at Wal-Mart is lower than your local grocery chain, you might be surprised at how great the grocery selection is at Wal-Mart.  I now try and buy as much as possible from Wal-Mart.  If I’m looking for high end meat to throw on the grill, I will go to a more expensive option such as Fresh Market.  Everything else, I will go with Wal-Mart.  This doesn’t bode well with grocery chains.  As an investor, I’d stay away from them.
  • Movie rentals – the kiosk where you can rent the latest movies for $1 a day at Wal-Mart are incredibly convenient and very cheap.  Why not?  Will this hurt Netflix (NFLX)?  Maybe.
  • High End Electronics – Wal-Mart has been ramping up its consumer electronic offerings.  Whether it is Apple products (rumor is that Mac computers might go on sale soon), the latest smart phones (iPhone, Palm Pre) or an array of large screen TVs, Wal-Mart has it all.  This will likely hurt retailers such as Best Buy (BBY).
  • Used Video Games – The latest rumor is that Wal-Mart will soon be buying back used video games from consumers in exchange for store credit.  This could be a huge dent in the momentum of GameStop (GME)
  • Dollar Items – Capitalizing on the recent success of the dollar chains such as Family Dollar, Wal-Mart will soon feature a “dollar aisle” where all items in a designated section or aisle in the store will all be under a dollar.

As you can see, Wal-Mart continues to innovate and expand its offering and services.  They continue to offer more and more, attracting more and more new customers.  I think it is a fantastic company and a great long term holding for any investor.

As of writing this article, the share price of WMT is just shy of $50.  At current levels, the dividend yield is approximately 2.2%.  If you’re looking for a strong company to own through thick and thin, I would definitely buy at current levels.  Consider buying half of your position now and half at a potential lower level.  An ideal entry point would be between $40-$45 where your yield would be between 2.4-2.7%.

3 Comments »

  • Matt Peer said:

    You’re forgetting one VERY big one: The revolutionary $4 prescription drug program. Not only does it help those that can ill-afford more expensive drugs, it forces WAG, TGT, COST, etc. to follow suit. This, I believe is one of the most amazing things they offer.

    I couldn’t agree more with you about the groceries. I honestly can tell you that the quality of produce at WMT is far superior to that of my local Piggly Wiggly or Sentry (Wisconsin).

    As far as entry point, I would say jump in now before this one rockets. I would view WMT as a safe haven in this economy, more than an investment. Better than gold anyway 😉

  • loan said:

    and its no a surprise, they haven’t been making big money on products, keeping low profit, not with everything, of course, but, majority of the stuff

  • loan said:

    and its not a surprise, they have been keeping their profit low-but, thats what we need