Here's Why Wal-Mart's Pullback Is a Huge Opportunity

While critics think that Wal-Mart (WMT) has lost its mojo, I think the stock is a great buy amid the recent volatility in the market. In addition, the recent pullback in the stock makes Wal-Mart even more attractive and a certain buy going forward.

A safe investment

2015 was a volatile year for Wal-Mart Stores Inc., but the company is headed in the right direction this year. Wal-Mart is a stock that performs well irrespective of how the market moves, which is why I think it is a great buy amid the volatility.
Wal-Mart has a trailing beta of just 0.19. This suggests that it is not likely to move considerably in the both direction. Thus, if the market was to take an impulsive downturn, investors can have faith that the company’s stock would not move down substantially.

One more significant thing that should shield Wal-Mart longs from any downside activities is its low valuation. At present, the company is trading at nearly 15 times trailing earnings compared to Dollar General’s 20 times trailing earnings, which is noticeably low as compared to the S&P 500 in general. Wal-Mart also has a generous dividend yield of 2.87 percent, which is another reason why it is a prodigious choice for conservative investors.

Throughout the last twelve months, Wal-Mart has lost 15 percent of its value, whereas Dollar General is up 8 percent. The reason for this difference is that sales and earnings growth has been sluggish for Wal-Mart and strong for Dollar General. Furthermore, Wal-Mart shared slender sales decline in the previous year as compared to 2014, whereas Dollar General’s top line jumped 8 percent.

However, bad news offers good opportunities. Keeping in mind Wal-Mart’s valuation metrics, it presents more value than Dollar General. With the stock beaten down, Wal-Mart is currently cheaper than Dollar General and also has a better dividend yield, making it a better pick out of the two.


Investors who are expecting the market to take a turn for the worse should prefer Wal-Mart over Dollar General. However, given the current volatility of the market and uncertainty about the future, Wal-Mart is a lot safer stock as compared to Dollar General.

As of now, I think every investor should have Wal-Mart in their portfolio. Wal-Mart is an ideal stock for conservative investors and it even performed nicely during the 2008 financial crisis. The recent pullback provides a great opportunity for long-term investors to add to their positions or open a new position.
Published on May 16, 2016
By Akshansh Gandhi

Copyrighted 2020. Content published with author's permission.

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