Even Amidst Retail Slaughter, Walmart Is a Buy

While many retailers have been taking it on the chin in the past few weeks, one — Walmart (WMT) — should be just fine. But before we look at the virtues of WMT stock, let’s look at the carnage in the rest of the sector first. Best Buy (BBY) saw its share price plummet by 29% Thursday after reporting that same-store sales during the holiday season had fallen about a percent from the year before. Now, Mr. Market has been known to overreact to disappointing sales data, but Best Buy’s share price collapse seems a little extreme — a 29% drop after a 0.9% sales decline seems a little out of proportion. So, what gives?

Yet WMT trades at a very attractive 13 times earnings and 0.5 times sales. It also yields an attractive 2.4% in dividends and has been aggressively raising its dividend (see chart) and buying back its stock. And while WMT stock is not seeing the growth it once did, unlike many of the other struggling retailers, Walmart is actually able to grow its top line revenues. It also happens to be the only company with the logistical infrastructure in place to compete with Amazon. Are you going to double your money in WMT in 2014? Probably not. But I do expect it to outperform the broader market given its low price and the generally bearish sentiment towards the stock by investors.

Source: InvestorPlace

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