Current Date and Time: Wednesday, December 3rd, 2008
November 24th, 2008
Wal-Mart (WMT) has been my best performing and most consistent stock during this recession. See my previous WMT article from May 2008. There isn’t much to say about WMT that hasn’t been said….recession proof…blah blah blah…evil empire…blah blah blah. But be that as I may, I’m not buying anymore WMT, yeah that’s right. No more, at least for the time being. I think 63ish dollars is about as far as WMT will go. Look, I know WMT will continue to kick ass in its sector and is a safe secular company, but it’s not worth buying above 50 dollars. Due to the evil empire factor, WMT’s ceiling is limited, it will never enjoy Apple’s kind of price jump. Eventhough WMT’s numbers are immensely better. This is the price you pay when you own a company like WMT. So, if you already have WMT, enjoy the sweet dividends, take profit if you plan on leaving the country and buying your own tropical island. If you don’t own any WMT, just wait a few quarters when the economy recovers, then WMT will be out of favor again and goes back to being the unloved stepchild. Then, and only then, will I buy WMT again.
Okay, so if I’m not buying anymore WMT then what the hell am I buying? Isn’t this bargain-basement, blue-light special time? (A little retail humor.) Time to think outside the box and go small cap. Ladies and gentlemen, allow me to present for your consideration: Air Methods. This company provides helicopters, pilots, flight nurses, flight paramedics, and aviation mechanics to hospitals. They also custom build medical helicopter interiors for the civilian as well as US Department of Defense customers. What I really love about Air Methods is that they have a monopoly in their industry. Air Methods is the Wal-Mart of the Medical Aviation industry.
~Huy Nguyen
But this page is not about Economics 101, nor is it about how WMT came to master the science of global retailing, rather it is how I came to acquire WMT stocks in my investment portfolio. Now admittedly, I do not shop at WMT. However, since 1996, I have consistently visited Wal-Mart and Sam's Club at least twice per year in order to get a more intimate "feel" for the business. It may surprise some of you out there that I actually did not buy WMT until the 3rd quarter of 2007 when the price to earnings multiples dropped to around 12. I don't like buying retailers, whether it's traditional brick-and-mortar or on-line, when the price to earning multiples are above 15, not even Wal-Mart.
Halfway through the first quarter of 2007, it was very obvious to me that we were in a recession. (Anyone who thinks otherwise, in my opinion, is being intellectually dishonest.) WMT can weather a recession and the weak dollar because of its:
competitive pricing, strong presence in foreign markets, economy of scale, and most importantly, efficient infrastructure. The proof is in the financial numbers.
WMT earned record profits in fourth quarter 2007 and posted strong earnings in the first quarter of 2008, despite the soft economy. Politicians and media crusaders can grand stand all they want to, but in
these tough economic times most Americans are more concerned with how to provide for their families then how WMT conducts its business. And that, to wit, is how Wal-Mart is able to put up great numbers in this economy.
~Huy Nguyen
| Purchased Price | Current Price |
|---|---|
| 42.00 | 60.00 |