Ten Spot Friday – 3 Reasons for Wal-Mart (WMT)

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After writing about how I wimped out during a recent opportunity to be frugal, I decided to set a small, achievable goal this week.  I cut out spending on energy drinks, convenience store snacks, and iced coffees this week.  To reward myself, I’ll drop a Ten $pot at Loyal3 today.  I have 3 stocks on my radar: K, MCD, and WMT.  I’ve recently added some K and MCD so I’ve decided to give WMT a $10 boost.  Here’s 3 reasons why:

 

#1.  Buffett’s Advice: Understand the company and find an economic moat

I understand Wal-Mart because I’ve dropped uncountable sums of $$$ there over my lifetime.  Wal-Mart also has a huge “moat”.

Here’s a quick snippet from Wal-Mart’s website to back it up:

“Each week, more than 245 million customers and members visit our nearly 11,000 stores under 71 banners in 27 countries and e-commerce websites in 10 countries. With fiscal year 2014 sales of approximately $473 billion, Walmart employs 2.2 million associates worldwide.”

Wal-Mart was also ranked #1 on the 2014 Fortune 500 list.  I suppose I could go on about Wal-Mart and Sam Walton’s success but I won’t.

 

#2.  Dividend Aristocrat

WMT is a Dividend Aristocrat that has increased its dividend payout for 39 years!  The current yield is about 2.5%.

 

#3.  It’s a deal?

Determining if a stock is a good deal seems to be a little bit like black magic with some stats behind it.  I’m trying to learn how to evaluate stocks but I’m not a professional so take this with a grain of salt.

– Current P/E is 15.7 versus a 5-year average of 14.3.  This is higher than I’d like to see but WMT’s P/E is still below the industry average of 17.3 and S&P’s 18.6. (Stats taken from Morningstar)

– Its current payout ratio is between 30-50% depending on where you look.  Still a good range for me.

– WMT’s stock price is almost 6% below its 52-week high.  Not necessarily a clearance price, but still decent given that many stocks are at or near high points right now.

 

So there you have it.  3 reasons I dropped $10 on WMT using my Loyal3 account.  Have a wonderful 4th of July for those of you in the U.S.

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McArabia Chicken

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When listening to Peter Lynch’s philosophy, he touches on an investing research approach that involves talking to customers, employees, and business partners of a company.  Philip Fisher also talks about the scuttlebutt approach of finding out as much as you can about a company.  Most of us probably won’t have a chance to talk to a company’s managers or visit their facilities but we can quite easily research the customer’s perspective.

Today, I find myself in an international airport in the Middle East.  Looking for something to eat, I venture to the airport’s food court.  The food court provides a variety of sub sandwich shops, Indian food, fried chicken, and fast food hamburger joints.  As I scan the options, I see a plastic Ronald McDonald smiling at me.  Because I own a VERY small portion of MCD I figured I should probably eat where I’m invested.

As it turns out, McDonald’s is the busiest joint in the food court.  Perusing the trimmed down menu of standard McDonald’s offerings, I notice something new I’ve never seen before: McArabia Chicken.  I decided to order it and it was quite tasty.  I’ve read the stories of McDonald’s international expansion but I’m still a bit surprised to see it thriving in a Middle Eastern airport.

I’m chalking this up as a bonus research opportunity on a company I plan on making a significant pillar of my portfolio.  I recently watched an older Q&A session with Warren Buffett where he talked about how he likes companies that “travel well”.  What he meant by that is he likes it when a company can do well internationally.  For a food establishment to travel well is no small feat in my opinion.  After finishing up my McArabia Chicken with a Coca-Cola Light (aka Diet Coke in the U.S.), I have even stronger feelings towards MCD.

Intelligent Investing

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My interest in investing has led me to online research of the likes of Warren Buffett, Peter Lynch, and Benjamin Graham.  Graham’s book, The Intelligent Investor, is commonly referenced as one of Buffett’s most recommended investing books.  I haven’t read the book yet but started listening to some of it in audio format.  I don’t think it has any silver bullets in it but it appears to provide some sound principles for the defensive investor.

Being a new investor, I found the concept of value investing interesting.  After hearing about the idea, it seems like an obvious approach but it isn’t something I had really put much thought into before listening to a few chapters of The Intelligent Investor.  While I don’t know how to evaluate the price of stock which is a talent Buffett has become famous for, I like the idea of buying good stocks but only at a good price.  This has piqued my interest even more which means I have still have a lot to learn.