Tuesday, November 29, 2011

Investing doesn't have to be scary

I personally have never gone shopping on Black Friday, so I cannot relate to some of the craziness that goes on in the malls across America. To me it all seems scary; I mean I have read that people were pepper spraying each other. Now that all the madness is over I can concentrate on writing about the fear of investing in individual stocks. Let me just say that investing done right is never scary, what may be scary are the returns we may get if we do not know what we are doing. I have made it my personal mission to try to steer people towards individual stocks and hopefully this will change someone’s life. Today I am going to look at Wal-Mart (WMT) which has had some of issues with wild shoppers during Black Friday.
Wal-Mart is the largest retailer in the world; they offer customers a huge mix of merchandise. Wal-Mart sells food, electronic s, clothes, medicine, jewelry, etc. They also own Sam’s Club which is a direct competitor to Costco. Wal-Mart is big, but is it a good investment? Let’s look at some numbers.
·         Market Capitalization of almost $200 billion
·         Price/Earnings ratio of 13
·         Dividend yield over 2.5% with dividend rate rising over 100% in last five years
·         Revenues have increased from around $350 billion in 2007 to over $420 billion in 2011
·         EPS has risen from $2.71 in 2007 to $4.47 in 2011
·         Book value has risen from over $12 in 2006 to close to $21 in as of October 2011
·         Virtually no debt on the books
As we can see Wal-Mart has consistent revenue growth and very good dividend growth, but will it give us returns that we can be happy with. Below I have attached a chart of Wal-Mart vs. the S&P Index. Please note that the chart is showing WMT and the S&P index with dividends reinvested.

As we can see, Wal-Mart destroyed the S&P by almost forty percent over the span of five years. Wal-Mart may not be the most exciting company to invest in, but the point of the article is to show that you do not have to be scared to invest; even a conservative retailer can beat the pros. Are you afraid to invest? I hope the answer is no.

Disclaimer: All articles are written as an opinion of the writer or writers. The contributors on this website are not professional investment advisors. These articles are written to share investing ideas that may be of interest to the reader. Always seek the advice of a professional invesment advisor before investing.

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