This Beat Down Giant Is Ripe For The Picking

Sometimes there are opportunities in the stock market that are simply too good to pass up.  These occasions are very rare and few in between but when they happen, it’s time to pounce on them like a cat jumping on a mouse.

It is within these rare, special situation times that investors are able to snap up quality stocks at a bargain and ride them back to their former glory.

Professional investors ONLY purchase stocks during the rare times they suffer short-term distress.  The robber baron named Baron Rothschild had a name for this type of wealth building activity.  He called it buying when there is blood in the streets.

baron rothchild

Intellectually, it seems like an easy procedure to buy stocks after they have been knocked down.  However, it is the most difficult thing for most investors to actually execute.   The reason for this is that investors are programmed to purchase only stocks whose price is appreciating in price.  It feels good to buy stocks that are making new highs.  Unfortunately, this course of action is what can often lead to losses.

Professional investors circumvent their natural tendencies to purchase stocks that are making new highs and only target quality stocks that have been knocked lower.

trading brain

Certainly, this isn’t a fool proof method of consistent profits, however, it is a time-proven way of building wealth in the stock market.

Consensus Picks has identified a quality company that is recently knocked lower and has set up to be an optimal buy candidate.

Make no mistake, nothing is guaranteed in the stock market.  With that said, we firmly believe that this retail stock has all the signs of a powerful investment at the current levels.

Let’s take a closer look:

If you haven’t already guessed it, I am referencing the recently suffering retail giant Wal-Mart (NYSE:WMT).

walmart

 

It seems a perfect storm of bearish pressures has hit this behemoth, leading retail chain.  The shares are trading lower by nearly 22% over the last 52 weeks.   In 2015 alone, the stock price has plunged from over $90.00 per share to a low in the $58.00 per share zone.  Shares are currently trading near the lows of the year which creates an ideal buy opportunity for savvy investors.

Most recently, the company announced that it expects that its bottom line could fall by 12% next year.  This dire forecast resulted in the shares plunging over 10% in one trading session!

Add in the fact that Wal-Mart is becoming more employee centric by increasing their wages and it paints a bearish short-term picture for the shares.

Furthermore, the company is delving into the e-commerce business to better compete with Amazon.  This is also a short-term capital drain as Wal-Mart gains traction in the on-line world.

We see these bearish headwinds as being short term in nature and firmly believe that investors have over-reacted creating the perfect buy opportunity for bargain hunting investors.

Wal-Mart started as a dream of Sam Walton in the early 1960’s.   Mr. Walton had a dream of changing the retail experience for the better and exceeded his vision by a thousand times with his success.

Wal-Mart describes his road to success by stating, Sam’s competitors thought his idea that a winning business could be built around offering lower prices and great service would never work.

As it turned out, the company’s success exceeded even Sam’s expectations. The company went public in 1970, and the proceeds financed a steady expansion of the business.

Sam credited the rapid growth of Walmart not just to the low costs that attracted his customers, but also to his associates. He relied on them to give customers the great shopping experience that would keep them coming back.

Sam shared his vision for the company with associates in a way that was nearly unheard of in the industry. He made them partners in the success of the company and firmly believed that this partnership was what made Walmart great.

sam waltont

As the stores grew, so did Sam’s aspirations. In addition to bringing new approaches and technologies to retail, he also experimented with new store formats—including Sam’s Club and the Walmart Supercenter—and even made the decision to take Walmart into Mexico.

Sam’s fearlessness in offering lower prices and bringing Walmart’s value to customers in the U.S. and beyond set a standard for the company that lives on to this day.

His strong commitment to service and to the values that help individuals, businesses and the country succeed earned him the Presidential Medal of Freedom, awarded by President George H. W. Bush in 1992.

It has since grown over the last fifty years into the largest retailer in the world. Today, nearly 260 million customers visit our more than 11,500 stores under 65 banners in 28 countries and e-commerce sites in 11 countries each week. With fiscal year 2015 net sales of $482.2 billion, Walmart employs 2.2 million associates worldwide – 1.4 million in the U.S. alone. It’s all part of our unwavering commitment to creating opportunities and bringing value to customers and communities around the world.

Remember, this company has over ½ of a trillion in annual revenue!  Talk about a giant presence in the global retail marketplace.

Most investors have seemed to forget that on top of the bearish news, WMT has forecasted that revenues will grow at around 3% for the next several years on the top line.  This is anything but bearish.

In addition, WMT has increased its quarterly dividend every year since 1974!  Talk about a compelling reason to add the stock at the new discounted level to your portfolio.

wmt ceo

Meanwhile, back in 2013 the company announced a share buyback program of an astounding $15 billion worth of shares.  At the last shareholders meeting, the CEO announced a second $20 billion buyback program in addition to the original!   Man, that is nothing  but a bullish signal.  Particularly since CEO Charles Holley plans on wrapping up both these programs within the next 24 months.

wmt earnings

Add in the two buy back programs, the consistent dividend hikes with the current sharply discounted price and going long is a no brainer.

Future bulls should not forget the following 4 common sense reasons to purchase the company.

Reason 1.  Economies of Scale

Wal-Mart is the largest retailer in the world, bar none.  These economies of scale enable it too deeply compete against every and every competitor.

 

Reason 2. Emerging Market Potential

WMT boasts global reach and the ability to morph into every emerging market with ease.  It has proven this again and again.  As the globe continues to build wealth and economies turn capitalistic, the upside for WMT continues to grow.

 

Reason 3.  Needs Not Wants

WMT sells consumer needs not wants. This makes the business model basically recession proof.  Add in the fact that Wal-Mart offers the lowest price and it adds strongly to the bullish case.

 

Reason 4. Strong Cash Flow

The company boasts over $16 billion in free annual cash flow. Think that is a competitive advantage?  You bet it is!  In addition to nearly $6 billion of cash on the books and WMT becomes unbeatable in the global retail world. Remember, cash is king and Wal-Mart has a tremendous amount of cash to fend off any competitive threat and grow the company into the far reaches of the free market.

As you can see, there is a very compelling case to purchase WMT shares right now in the $58 to $59 per share zone.