StokBlogs - WMT

Billionaire widow of Wal-Mart founder dies at 87

Theo — Fri, 20 Apr 2007 01:31:28 -0400

Helen Walton, widow of Wal-Mart founder Sam Walton, died Thursday evening at her home, the company said in a news release. She was 87.

Walton was surrounded by family members when she died of natural causes, the company said.

WMT DCF Analysis

biscosc — Tue, 13 Feb 2007 15:34:49 -0500

Current Stock Price	48.03
Shares Outstanding	4173
Next Year's FCF	12774
Perpetuity Growth Rate	0.03
Discount Rate	0.1

10 Year Valuation Model	Yr 1	Yr 2	Yr 3	Yr 4	Yr 5	Yr 6	Yr 7	Yr 8	Yr 9	Yr 10

Assumed Growth Rate		0.08	0.08	0.08	0.07	0.07	0.07	0.07	0.07	0.05
Free Cash Flow	12774.0	13795.9	14899.6	16091.6	17218.0	18423.2	19712.9	21092.8	22569.2	23697.7
Discount Factor	1.10	1.21	1.33	1.46	1.61	1.77	1.95	2.14	2.36	2.59
Discounted Cash	11613	11401.6	11194	10990.8	10691	10399	10116	9839.9	9571.6	9136.49

Perpetuity Value = (Yr 10 FCF x (1 + Perpetuity Rate)) / (Discount Rate - Perpetuity Rate)
Perpetuity Value =	348695
Discounted =	134437

Total Equity Value =	Discounted Yr 1-10 Values + Discounted Perpetuity Value
Total Equity Value =	239391

Per Share Intrinsic Value =	57.37
% Discount to Intrinsic Value	16.28%

To get my Next Years FCF estimate:
Income from Q1, Q2, Q3 of 2006 from latest 10Q -> 7.345 billion
Add back loss from discontinued operations of 894 million -> 7.345 + .8934 = 8.239 billion
Add Income from Q4 2005 -> 8.239 + 3.589 = 11.82 billion
Add 8% income growth for next year -> 11.82 * 1.08 = 12.77 billion

Discount Rate
I'm using is 10%, which is standard.

I think this is a conservative estimate and believe 16.28% will outperform the market over the next 12 months while taking on less risk.

Wal-Mart Stores Inc (WMT) - An 'Inevitable' Sold

Theo — Fri, 09 Feb 2007 00:52:06 -0500

Warren Buffett calls Wal-Mart Stores Inc (WMT) an 'inevitable' and that is why he, and many other value investors such as Joel Greentblatt, Wally Weitz, Tweedy Browne, and Bill Nygren - to name a few - are invested in Wal-Mart. I too believe Wal-Mart is an inevitable - a company that will continue to thrive for years to come. Until recently I owned the stock, but sold out the other day. (I made just enough to cover the transaction fees and a nice dinner.)

My original thesis still stands however: Wal-Mart is a great stock and by far one of the safest out there. I don't think you can go wrong. In fact, I am positive on that. Wal-Mart is a much better alternative to holding cash and, at historical low multiples (P/E, Price/Book, Price/Sales, Price/Cash Flow), the stock is cheap. The street seems to have forgotten that Wal-Mart is still a growth company. Let's look at the Income Statement for verification:

The Balance Sheet and Cash Flow Statement are just as good. The company continues to buy back shares every year and use excess cash to open new stores. The Walton Family also still owns an incredible 40% of the company ($80 billion!). Now check out the chart:

The above chart shows a concept that a fellow StokBlogs member, schin, introduced me to: Coiled String Theory. The idea is that earnings accumulate and makes the balance sheet strong while the stock price comes down. Quality goes up, price comes down (a value investor's dream). Wal-Mart has been growing earnings and book value every year for the past five years yet the stock price has fallen and now flat-lined. Eventually, the market will come to its senses and the "string will get sprung".

Anyhow, that is my case for why I bought the stock. You probably care more about why I sold, however. Well, readers of my blog will know that I have extremely strong convictions right now about the US Dollar falling, the economy heading into a recession, and the price of oil shooting up into the stratosphere. Like Wal-Mart stock, I also consider those events an 'inevitable'. It is just a matter of time. The only antidote to those events is to own assets that will inflate along with the economy. Energy and gold stocks are the best of those assets.

Like I said above, Wal-Mart is also better than cash because it is a rock-solid company. Sure retailer stocks will get hit during poor economic times, but people will continue to shop where there is value - and anybody who has ever walked into a Wal-Mart knows they give their customers the best value. So the stock should do fine. But oil and gold will do even better in my opinion. As an investor, I must stick to my best ideas. If I could not find any gold or oil stocks worth owning, I would still be holding Wal-Mart. But I have found more opportunities than I have cash for. And so my portfolio is now heavily concentrated in those sectors. Tomorrow I will follow this article up with my thoughts on Enterprise Products Partners L.P. (EPD), which is the main stock I traded Wal-Mart for.

Coke caves under Wal-Mart pressure

Theo — Wed, 28 Jun 2006 13:42:22 -0400

There seems to be no limit to the power of Wal Mart Stores Inc (WMT). CNN had a good article recently about how Coca Cola (KO) had to change their supply system in order to please Wal-Mart. Not even a company as old and as big as Coke can say no to Wal-Mart. That tells me Wal-Mart is a force not to be reckoned with.

For this reason - and MANY others - I opened a position today in Wal-Mart's stock. I will blog more about that soon.

Coca-Cola, fearing Wal-Mart would launch its own sports drink to rival the beverage giant's Powerade if it didn't agree to the retailer's new distribution terms, caved under the pressure and altered its own century-old supply system, a published report said Thursday.

Wal-Mart, the world's largest retailer, asked Coke last year to switch to the straight-to-warehouse delivery method, and Coke's largest bottler, Coca-Cola Enterprises (Research) (CCE), began doing so across much of the U.S. in April, the Wall Street Journal said.

But according to June 1 court filing by Coke, the company stated that it faced a "serious risk" of a Wal-Mart-branded rival to Powerade unless it abided by Wal-Mart's demands of direct distribution instead of having Coke (Research) bottlers deliver drinks to individual stores within their exclusive territories and stack those drinks on store shelves.