It is good times for Walmart investors. As we’ve been predicting here for some time, the run to all time highs for Walmart (WMT) was inevitable. The company is operating very well and it in today’s economic environment as well as investing environment, Walmart is a very attractive option. It has had quite a run in recent months, so it’s likely not the best time to buy (our last buy was in August at $49.50/share). Let this play out and we’ll see what happens in the months ahead.
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Huge day for Walmart as it has broken out to another decade-high and is now approaching levels only seen once in its history in the dot-com bubble hey-day of just under $70/share. It’s been quite a ride back to these levels, so we will see if the stock can reach historic highs.
A major catalyst in its recent move is the lower price of oil. Higher oil prices are one of the main risks of investing in WMT for two reasons. First, the low-end consumer is hit hard by higher prices at the pump and that impacts their spend at stores like Walmart. Second, with how far WMT moves products on a daily basis, higher transportation costs often come right out of the bottom line for Walmart.
As oil has taken a major hit in recent weeks, Walmart has benefited mightily.
We’ll continue to watch the trading on this stock and to see if the $70 level is breached.
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Investors around the world like to follow what Warren Buffett does with his massive stocks portfolio. As we show on our major holders list, Berkshire is one of the largest holders of Walmart stock.
Well, it appears that Berkshire likes Walmart even more these days. In his latest filing, Buffett reported that his firm added roughly 8 million shares to the existing position as of the end of March.
The move takes his Walmart holdings from roughly 39 million shares up to just under 47 million shares. His holdings represent about 1.37% of Walmart’s outstanding shares.
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In another positive development for Walmart US, Walmart is reporting that the small store concept known as “Walmart Express” has turned profitable in just a year.
The first Walmart Express store opened last June in Arkansas. There are now roughly 10 of these stores in places like Chicago as well as rural parts of Arkansas and North Carolina.
The stores are becoming profitable faster than it appears Walmart anticipated.
In a retail environment where big box stores are struggling (see Best Buy), this additional concept is a great part of the Walmart US portfolio.
You can bet that Walmart will be rolling out more of these stores in the future.
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Walmart Over $63, New 52-Week High
May 22, 2012
in Commentary
Since the earnings last week, Walmart has erased the losses on the stock incurred in the wake of the Mexican bribery scandal. The stock is now trading over $63/share, is at a new 52-week high and is essentially at levels not seen in over 10 years.
There are a few catalysts here.
First, let’s not overlook the earnings. Walmart delivered a quality quarter and most importantly, they delivered a good same stores sales number for Walmart US. This is the metric most widely looked at.
Second, oil/gasoline prices have been dropping recently. Lower fuel prices benefits Walmart immensely. First, it helps the consumer and moreover, it helps lessen Walmart’s transportation costs. This is BIG.
Lastly, I think traders may be cycling into more defensive names in recent weeks as the market is struggling. Sentiment has changed with the rearing of the ugly debt issue in Europe and it’s becoming more obvious that growth might be slowing here in the US.
I decided to sell a June call with a $65 strike covering 100 of my Walmart shares. This provides me a small increase in income (since I collect the premium by selling the call), and it will only affect me if the WMT shares go above the $65 share price. In that case, I’d be forced to sell at $65. My risk is that WMT is over $65 and I’m forced to sell at just $65 leaving money on the table. It’s a short term move and I think that it’s more likely that WMT stays under $65. If I’m wrong, my position will be decreased in WMT but at a nice gain. If that occurs, I’ll look to buy back in hopefully at lower levels.
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