Wednesday, June 01, 2005

The Peridot Capitalist: The Wal-Mart Bear Market - Part 2

The Peridot Capitalist: The Wal-Mart Bear Market - Part 2

We bought Wal-Mart at a discount!

We have been doing margin buying so it makes sense to be careful. Wal-Mart is down about 20% in a couple of months. It is now selling at a discount to the S&P 500. I don't believe this has ever happened before.

Granted, Wal-Mart is not the growth stock of old but it still has a lot of growth left. The company will open 165 international stores this year. Wal-Mart has become the hated company of late. Small retailers cringe at the thought of a Wal-Mart opening within a five mile radius.

When I am at Myrtle Beach and there is a Wal-Mart and a Kroger at equal distance, I usually stop at the Wal-Mart for groceries. The store is too big and check out is slow but the prices are the lowest. At the Kroger, I have to find my discount card or dramatically over pay for some items.

The low price strategy will always appeal to many consumers. The world is a big place. Growth should continue for years to come. Growth should be at least as strong as the average stock. Our margin costs is less than 5%, we think we will see at least 12% return.