Are Walmart Figures So Bad That You Need To Sell The Stock?

As a long-term investor in Walmart, I have seen many ups and downs of the stock in recent years. Today's sell-off will not change my attitude in this great company.

The reason why I'm long in Walmart is its deep value and roots to the US economy. Remember, Walmart has over USD 485 billion in annual sales. The next biggest competitor (Costco Wholesale) generated sales of USD 129 billion and Amazon USD 177 billion.

Walmart is a Dividend Champion with solid growing financials and 44 years of consecutive rising dividends. The current hike is very small, only 2% and may reflect the increasing pressure from decreasing earnings.

For sure, Walmart doesn't grow at a high rate and got pressure from online retailers like Amazon, but it doesn't mean that they will be killed by them.

And Wal-Mart still has room to grow dividends or run them flat until they have developed their own online sales tool to boost earnings.

WMT Revenue (TTM) data by YCharts

WMT Normalized Diluted EPS (TTM) data by YCharts

A Look at the debt in relation to Walmart's EBITDA gives us a feeling of the financial stability. The ratio is often used to evaluate the leverage of a company. The figure amounted to 1.4 for Walmart; a very solid number.

WMT Financial Debt to EBITDA (TTM) data by YCharts

Walmart's management released a fiscal year 2019 EPS guidance between $4.75 and $5 per share. Analysts estimated a slightly lower value. The consensus estimate was $5.13.

A main trigger for today's sell-off was the drop in online sales. The company reported e-commerce sales of 23%, compared to 50% in Q3 and 29% a year earlier. But its growth should come back to 40% this year.

Comparable sales - a key figure for retailer

Comparable sales could develop into bigger problems for an inflexible business model with high fix costs. If you have a big cost basis and your customer traffic slows; your earnings are in free fall.

Comparable sales for Q4 grew by 2.6%. Not bad in my view, especially when you consider that this was the 14th consecutive increase in the US market. So, what's the reason for the deep sell-off today?

In my view, there are three reasons:
- A high valuation which is not supported with higher growth
- Slowing and not accelerating online sales
- The expansion into e-commerce cost money and creates losses.

Let's take a small look at the current valuations from Walmart:

WMT PE Ratio (TTM) data by YCharts

I guess, the recent stock price increase from around 70 bucks to around USD 100 in 2017 (new all-time highs), was driven by hopes that Walmart has a concept against Amazon and could develop its own business into a fast growing multi-channel-retail machine.

Those hopes got trashed with the Q4 report. But does it mean that Walmart could not develop a wonderful online retail business over the next years? Definitly not!

The current sell-off is hard for an investor, especially when you bought the stock over USD 100. An EPS in 2019 of 5 dollar would mean that your initial investment has a P/E of 20.

For a slow growing stock like Walmart, who increased sales over the past 10 years by roughly 30%, is this ratio too high, especially when you consider that earnings run flat.

Conclusion

The capital market participants are very short-term orientated and focused on popular investment themes. For the retail industry means this: Go long online and short offline. The big money is betting that online will kill offline retail.

I don't think that this will happen. I believe the future is a mix of both, a kind of multi-channel. Amazon bought Whole Foods as a result of this idea. Without physical stores, you will not be a future player in retail.

Today's figures showing not a big growth but they are not as bad as the sell-off suggests. If investors think the valuation is too high, they should take a few chips off the table but Walmart is still a solid pick in the retail industry with a nice buyback and dividend yield close to 5% combined.

Stocks With Over $700 Bn Cash on Hands

In the second quarter of 2017, twenty-four of the largest American companies are holding on to a whopping $1.01 trillion in cash reserves, up 1.63% from the first quarter, according to analysis of second quarter earnings reports by Bank of America.

The biggest amount of money is created and kept by technology firms like Alphabet, Apple or Microsoft.

Here are the biggest cash companies compiled:

Source: Business Insider

Is Ebay Fairly Priced?

Ebay (NASDAQ:EBAY) is a large cap stock with a market capitalization of $40.55 billion. The company is a commerce company, which operates through its Marketplace, StubHub and Classifieds platforms.

Ebay is located to the special retail industry, a part of the services sector. The biggest competitors are Amazon (NASDAQ:AMZN), Etsy (NASDAQ:ETSY) and Wayfair (NYSE:W). Here is a full list of my peer holdings for ebay:



The ebay stock is up 41.14% over the past year which is a clear outperformance compared to the S&P 500, Dow Jones and Nasdaq. 

Source: Googlefinance.com

EBAY outperformed the market in recent months. Is it now a good time to buy, not to buy, wait or sell the stock? In this article, I will check the financial and valuation figures of the company and give a clear statement to the current situation.

I developed a simple system to evaluate the financial health of a company. It looks at the following six key metrics...

- Profitability (+)

The profitability of EBAY is good. The operating margin of EBAY amounts to 24.90% compared to 12.58% of the peer average.



- Debt Situation (-)

I use the debt-to-equity ratio as qualified measure to evaluate the debt situation.

The debt-to-equity ratio for Ebay amounted to 0.77. Compared to the peer ratio of just 0.6, the online auction company seems to be working with a higher leverage, which is in general bad due to a higher financial risk.



- Dividend Yield (-)

Ebay pays no dividends. The peer average offers a ratio of 0.21%. Most of the peers don’t pay a dividend. Mercadolibre (NASDAQ:MELI) is the only company with quarter dividends.



- P/E Ratio (+)

The current price-to-earnings ratio of EBAY amounts to 5.3. Compared to figures from the peer group, which are valuated with an average ratio of 72.71, Ebay looks cheaper than other companies in the industry.

This impression is also intact when we look at the forward P/E ratios. Ebay’s forward P/E is 16.83.



- Capital Returns (+)

Capital returns are important for investors. Two most used ratios to evaluate the capital efficiency of a company are the return on equity and return on investment.

All return ratios have better values than the peer average.



- Sales and EPS Growth (-)

Sales and earnings growth figures are also very important for investors. Quarter over Quarter, Ebay is losing market share with a sales growth of just 3.7% compared to an peer average value of 29.26%.


Ebay receives a "Hold Positive" rating

Ebay passes three of my six key metrics. Similar to my investment rating scheme, EBAY receives a Hold Positive Rating from me.

Rating	# Metrics
Strong Buy	5 +
Buy	4 +
Hold Positive	3 +
Hold Negative	2 +
Sell	1 +

What do you think about ebay? Is it a buy, hold or sell?

The Best Consumer Defensive Stocks Now!

Consumer defensive stocks can add some stability to a portfolio, as they tend to hold up relatively well during downturns while also participating in rising markets. 

The sector's relatively sleepy return over the past year led me to wonder if there are any high-quality bargains there. To find competitively advantaged stocks in the sector, I screened all the stocks from the sector and included those with attractive equity story, valuation, and growth figures.

Below are some highlights from our research reports of the companies.

How Tech Giants Amazon, Facebook, Microsoft, Apple and Google Make Money

Source: Barry Ritholtz

The Biggest Stock Buybacks With At Least One Billion Firepower

Stock buybacks, also known as share repurchases, occur when companies buy shares of their own stock to reduce the number of shares outstanding.

Stock buybacks can be used to offset stock issued to employees as compensation, or to improve earnings per share by reducing the number of shares by which earnings are divided. Sometimes, companies repurchase stock simply because they believe their shares are undervalued.

Buyback proponents say they reward these long-term shareholders by effectively increasing their ownership of the company, and they help boost the value of a stock by raising the company's earnings per share. And when there's no other compelling use for a company's cash, this is a better alternative than risky spending on takeovers or other big investments.

But the other view on buybacks is that — like the restaurant removing tables — their only impact is in making things look better than they seem. Yes, earnings per share rise, but that's not because earnings are growing. Even their fiercest proponents — somewhat hypocritically — say they're overused.

With that in mind, I've compiled all stocks with a billion dollar buyback announcement during the year 2016. In total, there are exactly 82 companies with such a big share buyback volume.

Here are the results...

These 20 Stocks Serve The Most Cash Reserves

Stocks with a high level of cash are better positioned in my view. They have enough room to think about growth opportunities and don't need to manage their debt.

Apple, Microsoft, Alphabet, Cisco and Oracle had amassed $504bn of cash by the end of 2015, nearly a third of the total $1.7tn held on the balance sheets of US non-financial companies, according to a new report from rating agency Moody’s. The top 50 holders accounted for $1.1tn of that amount.

These are the 20 most cash-rich companies on the us stock market...

40 Leaders And Laggards Of EPS Surprise / EPS Revision

A huge number of companies have released their Q4 fiscal figures. Market actors are looking deeply into those numbers in order to compare them with their expectations.

If a company does not meet them, it got punished.

Attached you will find the 10 best and worst stocks that beat expectations in Q4/2015. You will also find a list of the 10 best and worst stocks with the highest EPS revisions for the upcoming quarter.

Sometimes it indicates a clear trend.

Here are the top results...

20 Stocks With At Least One Billion Share Buyback Plan In 2016

When corporations are profitable and established, they tend to return capital to shareholders. 

This can be achieved via stock buybacks to shrink the float and to support the stock, or it can be done via one-time dividends or by raising their annualized quarterly dividends.

In my blog, I often cover successful long-term dividend growth stocks. Those companies managed to raise dividends over a decade or half century.

I also talk a little about buyback stocks. Those gave more money back vie share repurchases which is in the end the same.

Today I would give you a short introduction into the biggest share buyback announced from the current fiscal year 2016.

As of now, we've noticed 94 companies with fresh, new, or increased buyback plans.

Here are the biggest announcements from fiscal 2016 to date...

Here Are The 10 Most Loved And Hated Stocks On The Street Right Now!

Source: Bloomber

Here Is How The Most Dominated Companies Have Changed - Energy Loses Ground While Tech Becoming More Important

The Best Portfolio Of Cloud Storage Stocks And Which The Best Dividends Pay

The forecasts for burgeoning industries including the cloud and the Internet of Things (IoT) vary, but the common theme is undeniable: We are in the early stages of what are quickly becoming game-changing markets. The two cutting-edge technologies share a common thread: IoT amasses almost unfathomable amounts of data, while the cloud is the primary means of storing it.

If you are interested in technology stocks with focus on modern themes like cloud computing or social media, you should look at the following selection of stocks from the cloud storage industry.

Over the past decade, stocks from the portfolio generated a total return of 18.83% yearly. In 2014 alone, the return of the dividend paying stocks was 27.2%. Today it would deliver an inital yield of 2.77%. In 2005, the inital yield was only at 0.56%.

Even as cloud technologies and services remain in their early stages, it has become abundantly clear that revenue -- at least significant revenue -- is not going to come from hosting. Many of the big-time cloud providers have essentially made cloud data hosting a commodity, which is ideal for Microsoft and other companies from the field.

Here are the top yielding stocks...

16 Most Favored Stocks By Institutional Investors And Hedge Fund Managers

Institutional investors must know it better. That's a rule I often hear from friends but why should this be true? Maybe they are better informed because the shake hands with CEO's or politicians.

The second issue is that hedge fund managers have enough firepower to move the stock price in any direction.

However, don't think about why they are trading and let us look at the most favored stocks from big investor gurus.

Attached is the full list of the 16 most loved stocks. Do you like some of them?

These are the highest yielding results in detail...

100 Top Stocks Bought By Major Investment Gurus

100 most bought stocks by investment professionals originally published on Dividend Yield – Stock, Capital, Investment. I often take a look at the activities of well-known investment guru’s. Sure, hedge fund managers and activists are active investors who want to change something on the business model in order to push the current stock price. Ackman or Einhorn are such persons. I don’t follow them in detail but they are part of the screening results and due to their big influence, it makes sense to look at what they do. 

Investment gurus are asset or fund managers with big amounts of cash under management. They became popular by big returns and spectacular investment strategies. I talk about investors like George Soros and Warren Buffett. They all have one thing in common: The average return beats the market and if they invest, the market follows.

I always screen picks from Warren Buffett. He has a solid investment decision process and selects stocks I also like. Sometimes he gives me new ideas about long-term investments or about growth opportunities which I haven’t considered for the time being.  

In order to find the hottest stocks at the investment premier league, I made a screen of the biggest stock buys from 49 super investors over the recent six month and ranked them in my 100 best guru buy list. They all combined bought 449 stocks within the past half year.

The top stocks are now Microsoft and AIG International. Microsoft was purchased by 9 stock market professionals and AIG by 8. Exactly 60 percent of the top ten buys have a relationship to the technology sector. Investors still love this field because of the high growth potential and strong cash flows. But technology stocks are no big dividend payer.

Ken Fisher’s Top 30 Investment Portfolio Q3/2012

Originally published at “long-term-investments.blogspot.com”. Kenneth Fisher is an American businessman, founder and chairman as well as CEO of Fisher Investments, a money management firm headquartered in California. Fisher writes the monthly “Portfolio Strategy” column in Forbes magazine. Ken Fisher is one of the richest Americans and part of the Forbes 400 list of world billionaires. Funds run by Ken Fisher at Fisher Asset Management were valued at USD 34.91 billion.

Here is a top 30 list of his investment positions as of September 30, 2012. During the quarter Q3/2012, Ken Fisher had 458 total positions.

Top New Buys: CMCSA, PBR, TM, RY, NVS, VOD, CHL, NTGR, SAM, WRC

20 Best Stocks To Buy Or Sell On Black Friday

The best stocks to trade on Black Friday; originally published at “long-term-investments.blogspot.com”. Today is Black Friday. Yes, also for the financial markets is this calendar date a very meaningful event. It is the first day of the pre Christmas shopping season which indicates the strength of the full period. People searching for the best offers, the most attractive deals and spend as much money as their credit card allows. Some companies will benefit from Black Friday and the pre Christmas shopping season. Investors should be careful by buying Black Friday stocks.

I made a screen of well-known stocks which have an exposure to the current event. They are well diversified and should not have a higher downside risk if the sales numbers are weaker than expected. If you like the theme shopping and consumer goods and you like to buy stocks from several industries covering these ideas then you should take a look at the list of the 20 Black Friday stocks below.

The Black Friday shopping stock list consists of twenty stocks with consumer focus (apparel, jewelry, retail electronics and food). Most of them pay dividends and the average stocks is expected to grow in earnings by a double-digit amount. Below the results is one high-yield and sixteen have a current buy or better rating by brokerage firms.

524% Return With The Best Technology Growth Portfolio – Cloud Computing

High Growth Technology Portfolio Researched By “long-term-investments.blogspot.com”. Technology stocks are hot because they can boost your wealth in a very fast way if you bet on the next big theme. The current trends are smart phones and cloud computing. If you have had invested your money in a well diversified cloud computing portfolio, you should have realized a total return of 524 percent since January 2002. This represents a yearly return of 18.35 percent. Below is a list of 24 companies that have a business unit in this growth industry. SAP is currently the fastest growing cloud computing stock. Below the results are six companies with a positive dividend. Twenty IT-stocks have a current buy or better recommendation.

20 Global Brand Companies With Best Dividend Yields

The Worlds Biggest Brands And Their Dividend Payments Researched By “long-term-investments.blogspot.com”. Big brands guarantee a high consumer loyalty and stable cash flows. Big brands and high dividends are no contradiction.

I screened public listed companies that own a global portfolio and set a position of the top 20 global brands researched by Interbrand. Interbrand is a global branding consultancy, specializing in vast brand services, including brand analytics, brand strategy, brand valuation, corporate design, digital brand management, and naming. Recently, Interbrand published the results of its 13^th annual “Best Global Brands” report 2012 with the top 100 most valuable brands worldwide. Below the 20 best brand stocks are 17 with positive dividend payments. One company is a high-yield and six yield over three percent.

The Best Performing NASDAQ 100 Stocks Since Tech Bubble Burst In 2001

Nasdaq 100 Stock Performance Since February 2001 By Bespoke. The Nasdaq 100 traded this morning to levels it has not seen since February 6th, 2001. While the index itself is flat since then, just 36 stocks in the index today were also in the index back then. Below we highlight the performance since 2/6/01 of these 36 stocks: