Watch for Falling Stocks

Barron’s sees value in Wal-Mart (WMT):

At a recent price of about 44, the shares are trading at just 14.6 times estimated earnings for next year, the stock’s lowest multiple since 1995. And for the first time in practically as long, Wal-Mart’s P/E isn’t any higher than the broad market’s; it has often been about 30% higher.
The world’s largest retailer is famous for its “everyday low prices,” but investors today may be getting something even better: a once-in-a-decade low price.
While the stock has been sliding for the better part of two years, it could soon get a lift from a variety of forces — from changes in Wal-Mart’s management and merchandise to Americans’ renewed zeal for bargains in a time of high gas prices. Just last Thursday, the Bentonville, Ark., behemoth reported that same-store sales climbed 3.8% in September, at the high end of estimates, easing fears about the hurricanes’ impact. The news caused Wal-Mart’s stock to buck the day’s drop in the Dow and climb by 1%.
That may be just the beginning. Citigroup analyst Deborah Weinswig thinks the shares can rise more than 40% over the next year, to $63. Says she: “In an environment like this, with higher gas prices, the idea of a hypermarket where you can do one-stop shopping is a success.”

Business Week has an article on Wal-Mart’s new Metro 7 fashion line. Wal-Mart is indeed getting cheap, but I’d think it may become even cheaper in the future.

Posted by on October 9th, 2005 at 4:44 pm


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.