Tuesday, October 2, 2012

Can Wal-Mart Get Any Better?

First, I'd like to make a timely (and political, sort of) comment. We have an impending hurricane threatening the SE US. I've lived in the SE most of my life: Northern by birth, Southern by the grace of God. Anytime a natural disaster is coming Wal-Mart (WMT) always anticipates what its customers will need to recover and has those items already in transit before the storm ever hits. The company can only do that because it has one of the most complete and comprehensive inventory control and logistics systems on this planet. This is what gives Wal-Mart the competitive advantage over all other retailers. It knows what customers need and want and can purchase and get it on the shelves at the lowest possible cost. How does it keep doing this?

I also want to give a shout out to the power companies and Home Depot (HD) for their effective proactive disaster recovery programs. Maybe we could eliminate FEMA and outsource those functions to a partnership of Wal-Mart, Home Depot and the power companies. Rant finished.

So what's in store for Wal-Mart and should you invest in it? First for those of you who have never been in a Wal-Mart store, the company profile:

Wal-Mart Stores, Inc. operates retail stores in various formats worldwide. The company'’s Wal-Mart U.S. segment offers meat, produce, deli, bakery, dairy, frozen foods, alcoholic and nonalcoholic beverages (beer and wine where permitted), and floral and dry grocery; health and beauty aids, baby products, household chemicals, paper goods, and pet supplies; electronics, toys, cameras and supplies, photo processing services, cellular phones, cellular service plan contracts and prepaid service, and seasonal merchandise; fabrics and crafts, stationery and books, automotive accessories, hardware and paint, and sporting goods; pharmacy and optical services; shoes, jewelry, and accessories, as well as apparel for women, girls, men, boys, and infants; and home furnishings, housewares and small appliances, bedding, home décor, outdoor living, and horticulture products through discount stores, supercenters, and neighborhood markets, as well as through walmart.com.

The company also provides financial services and products comprising money orders, wire transfers, check cashing, and bill payment. Its Wal-Mart International segment includes various formats of retail stores, discount stores, supermarkets, supercenters, hypermarkets, restaurants, apparel stores, Sam’s Clubs, and online retail operations. This segment also operates banks that focus on consumer lending, as well as consumer credit products.

The company'’s Sam’s Club segment offers merchandise comprising hardgoods, softgoods, and selected private-label items under the Member’s Mark, Bakers & Chefs, and Sam’s Club brands through warehouse membership clubs in the United States, as well as through samsclub.com.

It operates stores in the United States and Puerto Rico, as well as in Argentina, Brazil, Canada, Chile, Costa Rica, El Salvador, Guatemala, Honduras, Japan, Mexico, Nicaragua, the United Kingdom, China, and India. The company was founded in 1945 and is based in Bentonville, Arkansas. (Yahoo Financial profile)

How has the price held up during the recent market softness? Look at this chart provided by Barchart of the price compared with the 20-, 50- and 100-day moving averages over the past 6 months and I think you'll agree that it's recovered nicely and is just about where it was 6 months ago:

(Click chart to enlarge)

Barchart technical indicators:

  • Barchart 40% short term technical Buy signal getting stronger
  • Trend Spotter technical Hold that should flop to a Buy near 54
  • Trading above its 20-, 50- and 100-day moving average
  • 4 new highs in the last 5 days and up 3.53% for that period
  • Relative Strength Index is 59.26% and rising
  • Barchart computes a technical support level at 52.59
  • The stock recently traded at 53.37 which is above its 50 day moving average of 52.29
  • The price is only 5.89% off its one year high vs. 19.13% off for the market as measured by the Value Line Index

Fundamental considerations:

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