While watching the market tank everyday-many days opening high and then crashing after a couple of hours-has me down. As I said before, I thought that the worst was behind us, and I was wrong. Since I started sharing my long term picks on this site (see lower left) The S&P 500 is down more than 5%, but the worst part is that the market had jumped over 7% before losing it all and then some. This makes me sad because I feel like a optimistic dumb-ass. I lost about 15% on holding Citigroup (C) long, and finally closed out a little while ago, feeling that I might as well cut some losses. I also closed out the long position on Vale ADR (RIO), as I felt bears were swamping almost all stocks, and I'd like to preserve some gains.
However, I did add one long position to my portfolio: Wal-Mart (WMT.) As I have talked about before (See My recession article ) I think WMT is a great play when the economy is doing ugly things. While low consumer sentiment, high unemployment and even higher gas prices may seem like big negatives for a retailer, WMT is different. Wal-Mart provides really cheap, yet quality goods, which is good for people who feel the economy is doing poorly and don't have jobs but still need food and toilet paper. Also, WMT has pretty much everything you could need at one location, and so for those who don't feel like driving around on $5 gas it serves as a one stop shop. All of these bode well for WMT. They keep costs low, drive away competition because of it and when people are short on cash, look incredibly attractive when it comes to buying the necessities. They also look good to me as a company that can survive these dire times.
Showing posts with label Wal-Mart. Show all posts
Showing posts with label Wal-Mart. Show all posts
Friday, July 4, 2008
Thursday, June 26, 2008
The Market
So a while back, when I first started this blog, I thought that the market had bottomed out. March 10 was the day I thought to be the bottom. Right around this time Bear Sterns had collapsed and been partially saved by the Fed and partially saved by JP Morgan. The S&P 500 Index hit 1273.37, and began to slowly, with great volatility move upwards. However, since the 08 peak in May, the market has lost almost all of its gains. Its down a little more than 10% since May 19th, and currently just above 2008 lows. If the market moves below this, which has been acting as a support, stocks could continue to fall for months.
Because I'm beginning to realize I was premature in calling a bottom (though theoretically March 10 still is the bottom) I think that some of my stock picks should be reassessed. I picked Citigroup back in March, with a price of 20.71 a share. Obviously now is a better time to buy, as you can get shares for 3 bucks cheaper. However, I would hold off on C, wait for any more write downs, analyst downgrades or macroeconomic bad news. Citi might drop even further, which could spell an even better entry point for what I still believe to be a good long term play.
I want to reiterate that most of my picks have done well regardless of the current demise because they are strong companies which were completely undervalued during the last round of market lows. There are many more out there, and even more that overall market sentiment is down so far.
I'm waiting for a sell off in companies like Apple and other solid companies who are not affected directly by sub-prime/credit losses. I missed getting in on this sell off last time (except I did recommend buying AAPL) and I've regretted it. Below I've included a couple of entry points for some stocks I'm watching. These entry points are based on the previous sell off, some technicals and looking at price valuations.
Google Inc. (GOOG)
Buy target: $500
Fwd P/E at this price: 24.85
Apple Inc. (AAPL)
Buy target: $150
Fwd P/E at this price: 28.85
Research in Motion (RIMM)
Buy target: $100
Fwd P/E at this price: 25.77
Wal Mart Stores Inc. (WMT)
Buy target: $55
Fwd P/E at this price: 15.89
Because I'm beginning to realize I was premature in calling a bottom (though theoretically March 10 still is the bottom) I think that some of my stock picks should be reassessed. I picked Citigroup back in March, with a price of 20.71 a share. Obviously now is a better time to buy, as you can get shares for 3 bucks cheaper. However, I would hold off on C, wait for any more write downs, analyst downgrades or macroeconomic bad news. Citi might drop even further, which could spell an even better entry point for what I still believe to be a good long term play.
I want to reiterate that most of my picks have done well regardless of the current demise because they are strong companies which were completely undervalued during the last round of market lows. There are many more out there, and even more that overall market sentiment is down so far.
I'm waiting for a sell off in companies like Apple and other solid companies who are not affected directly by sub-prime/credit losses. I missed getting in on this sell off last time (except I did recommend buying AAPL) and I've regretted it. Below I've included a couple of entry points for some stocks I'm watching. These entry points are based on the previous sell off, some technicals and looking at price valuations.
Google Inc. (GOOG)
Buy target: $500
Fwd P/E at this price: 24.85
Apple Inc. (AAPL)
Buy target: $150
Fwd P/E at this price: 28.85
Research in Motion (RIMM)
Buy target: $100
Fwd P/E at this price: 25.77
Wal Mart Stores Inc. (WMT)
Buy target: $55
Fwd P/E at this price: 15.89
Saturday, March 29, 2008
US Companies That Won't Be Hurt By a Recession
There's a lot of talk about a recession. I think we are probably in one, and to be honest, it doesn't really matter if we technically are, because our economy is suffering for sure. This spells trouble for most American businesses, because US consumers will spend less in general as they attempt to weather the economic troubles we face. The media won't help this either, because all the reports about how dismal our economic outlook is only keeps people's money closer to them, and US businesses will feel the hurt.
However, there are some US corporations which won't be hurt by a poor economic situation at home. These companies are insulated from domestic troubles by a variety of reasons. Some face huge demand from overseas Some see increase demand from citizens during rough economic times. Whatever the reason, finding a company like this and investing in it as a hedge against further economic downturns is a good way to grow your money in a time when most stocks are losing ground. Here are a few stocks I feel will not feel the recession, or may actually profit from it:
Wal-Mart (NYSE:WMT)
Wal-Mart (WMT), as we all know, is a huge chain of retail stores that sells everything from groceries to clothing. Known for cheap prices that run competitors out of business, WMT is all about price and not about quality. During rosy economic conditions, Wal-Mart sees large demand for their goods. In a recession, Wal-Mart sees HUGE demand. When consumer confidence is low and people are scared about spending money, they will search out the cheapest prices they can, and they will be willing to sacrifice name brands to do it. For necessities like clothing and food, WMT meets the demands of consumers concerned about cost. This is why Wal-Mart saw same store sales rise 3% in February, and why Analysts project WMT will grow by 12.5% next quarter. WMT will see continued growth throughout 2008, but it will probably peak in about 3-4 months, as the economic slowdown will probably begin to lessen at that point. WMT is up 8.79% from a year ago, and up 9.66% so far this year.
Caterpillar (NYSE:CAT)
Caterpillar (CAT), is the number one company when it comes to industrial, commercial and agricultural machinery and engines. CAT has the largest market share of this sector, with a $48.1 Billion market share. Last year they took in 47% of revenue from overseas, and with urbanization in China and India overseas foreign should see steady growth. This is a huge strength of CAT, it seems to be able to maneuver difficult situations here in the US because it has such a strong presence in other places.
Also, CAT provides products that few, if anyone, else can produce. Take for example the 777F, an enormous truck used in mining that can carry over 100 tons at a speed of 40 mph. No one else in the world can provide these kinds of equipment, and that's why you'd have to wait till 2012 for these bad boys if you bought today, and pay millions of dollars for it.
CAT provides little downside for investors, as it can benefit from basically any situation. Disasters provide the need for earth moving vehicles, economic growth of third world countries requires heavy machinery, and more growth here in the US also spells more demand for CAT's product. While the downside pay be low, CAT is a mature company and has less room for rapid growth than other companies. I see CAT as a low-risk play to balance a portfolio looking for a long term and slow growth winner. CAT is up 15.27% from a year ago, and up 6.24% in 2008.
McDonald's Corp. (NYSE:MCD)
The true king of fast food, McDonald's Corp. (MCD) represents today's society. Get something that's quick, pleasing, and most importantly fast. Do that, and then sell the rights to do that to other people who will do most of the dirty work themselves. Love them or hate them, MCD has it figured out. They run more than 31,000 restaurants, employ over 1.5 million people, and operate in over 100 countries. Not only that, but they do it for less than anyone. These last two reasons are why they survive a recession in the US. Because they have such a huge global market, the slowing the US doesn't kill them. Unlike an energy company that only sells the US citizens, MCD sells in most countries, and they are experiencing rapid global expansion. Secondly, the "dollar menu" looks pretty good during a period of economic decline. The inexpensive food they offer sees large demand when people have less money to spend. MCD is expected by analysts to grow 9.56% annually the next 5 years, and 10.7% this year. They are trading at a forward P/E of 17.34, with a forward PEG of 1.62. While it isn't the best value, MCD offers a steady investment when economic times are bad. This February they reported a 12% gain in same store sales. They are up 23.15% from a year ago, however they are down 5.82% Year To Date.
However, there are some US corporations which won't be hurt by a poor economic situation at home. These companies are insulated from domestic troubles by a variety of reasons. Some face huge demand from overseas Some see increase demand from citizens during rough economic times. Whatever the reason, finding a company like this and investing in it as a hedge against further economic downturns is a good way to grow your money in a time when most stocks are losing ground. Here are a few stocks I feel will not feel the recession, or may actually profit from it:
Wal-Mart (NYSE:WMT)
Wal-Mart (WMT), as we all know, is a huge chain of retail stores that sells everything from groceries to clothing. Known for cheap prices that run competitors out of business, WMT is all about price and not about quality. During rosy economic conditions, Wal-Mart sees large demand for their goods. In a recession, Wal-Mart sees HUGE demand. When consumer confidence is low and people are scared about spending money, they will search out the cheapest prices they can, and they will be willing to sacrifice name brands to do it. For necessities like clothing and food, WMT meets the demands of consumers concerned about cost. This is why Wal-Mart saw same store sales rise 3% in February, and why Analysts project WMT will grow by 12.5% next quarter. WMT will see continued growth throughout 2008, but it will probably peak in about 3-4 months, as the economic slowdown will probably begin to lessen at that point. WMT is up 8.79% from a year ago, and up 9.66% so far this year.
Caterpillar (NYSE:CAT)
Caterpillar (CAT), is the number one company when it comes to industrial, commercial and agricultural machinery and engines. CAT has the largest market share of this sector, with a $48.1 Billion market share. Last year they took in 47% of revenue from overseas, and with urbanization in China and India overseas foreign should see steady growth. This is a huge strength of CAT, it seems to be able to maneuver difficult situations here in the US because it has such a strong presence in other places.
Also, CAT provides products that few, if anyone, else can produce. Take for example the 777F, an enormous truck used in mining that can carry over 100 tons at a speed of 40 mph. No one else in the world can provide these kinds of equipment, and that's why you'd have to wait till 2012 for these bad boys if you bought today, and pay millions of dollars for it.
CAT provides little downside for investors, as it can benefit from basically any situation. Disasters provide the need for earth moving vehicles, economic growth of third world countries requires heavy machinery, and more growth here in the US also spells more demand for CAT's product. While the downside pay be low, CAT is a mature company and has less room for rapid growth than other companies. I see CAT as a low-risk play to balance a portfolio looking for a long term and slow growth winner. CAT is up 15.27% from a year ago, and up 6.24% in 2008.
McDonald's Corp. (NYSE:MCD)
The true king of fast food, McDonald's Corp. (MCD) represents today's society. Get something that's quick, pleasing, and most importantly fast. Do that, and then sell the rights to do that to other people who will do most of the dirty work themselves. Love them or hate them, MCD has it figured out. They run more than 31,000 restaurants, employ over 1.5 million people, and operate in over 100 countries. Not only that, but they do it for less than anyone. These last two reasons are why they survive a recession in the US. Because they have such a huge global market, the slowing the US doesn't kill them. Unlike an energy company that only sells the US citizens, MCD sells in most countries, and they are experiencing rapid global expansion. Secondly, the "dollar menu" looks pretty good during a period of economic decline. The inexpensive food they offer sees large demand when people have less money to spend. MCD is expected by analysts to grow 9.56% annually the next 5 years, and 10.7% this year. They are trading at a forward P/E of 17.34, with a forward PEG of 1.62. While it isn't the best value, MCD offers a steady investment when economic times are bad. This February they reported a 12% gain in same store sales. They are up 23.15% from a year ago, however they are down 5.82% Year To Date.
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