Gyroscopic Investing

Has anyone been looking at Walmart recently? Their stock has been hit and the outlook is negative due to worries about the US consumer. I think there are a lot of positives surrounding the company.

1. Tough times mean consumers go for low prices. Where better to find those than Walmart.
2. Company has been consistently buying back stock.
3. Recent article talks of expansion plans to buy Carrefour (international Walmart competitor) http://www.bloomberg.com/news/2011-08-1 ... iness.html
4. Nearly a 3 percent yield. (Quite a bit more than a ten year bond)

It seems that no matter which way the economy turns this company will do fine.

Walmart also fits into my longer term worldview that all industries from cars, to media, to banks, etc. are becoming bigger and more concentrated around a few powerful players. The "too big to fail" story is far from over it seems.

doodle wrote: Has anyone been looking at Walmart recently? Their stock has been hit and the outlook is negative due to worries about the US consumer. I think there are a lot of positives surrounding the company.

1. Tough times mean consumers go for low prices. Where better to find those than Walmart.
2. Company has been consistently buying back stock.
3. Recent article talks of expansion plans to buy Carrefour (international Walmart competitor) http://www.bloomberg.com/news/2011-08-1 ... iness.html
4. Nearly a 3 percent yield. (Quite a bit more than a ten year bond)

It seems that no matter which way the economy turns this company will do fine.

Walmart also fits into my longer term worldview that all industries from cars, to media, to banks, etc. are becoming bigger and more concentrated around a few powerful players. The "too big to fail" story is far from over it seems.

I think that Walmart will probably be a good buy at some point in the future, but I don't think that time is now.

We are currenlty in a secular bear stock market (at least in my opinion).  Probably not the time to try your hand at
stock picking. 

Walmart is one of those stocks (along with Berkshire Hathaway, Microsoft, Intel, and Cisco) that have been trading in a range for over a decade, while seeing their P/Es compressed (which is a hallmark of a secular bear market for stocks).

If you want to buy these stocks, buy them at the bottom of the range and sell them at the top.  Earnings don't matter that much.  It just compresses their P/Es more and more.

It's sort of dumb that it works this way, but it does.

MT,

I imagine that once the PE "spring" gets compressed enough it eventually takes off into a raging bull market.

I will keep an eye on the range. Thanks.

doodle wrote: MT,

I imagine that once the PE "spring" gets compressed enough it eventually takes off into a raging bull market.

I will keep an eye on the range. Thanks.

Yes.

By the early 1980s, apparently there were MANY companies with single digit P/Es.  Over the coming decades, many of these blue chip companies saw their P/Es expanded to the 20s and 30s.  In addition to solid earnings growth, this P/E expansion made for an amazing near-20 year run for stocks.

Last night's Nightly Business Report says:

Today’s 1.3 percent stock rally takes WMT up to a 12-year
high. 

Out of curiosity, for those using a VP, what percentage would you say of your entire portfolio (including VP and PP) would you risk putting into a single company such as Walmart? 2%? 5%? etc.

1NV3ST0R wrote: Out of curiosity, for those using a VP, what percentage would you say of your entire portfolio (including VP and PP) would you risk putting into a single company such as Walmart? 2%? 5%? etc.

0% 

I would risk as much as 1% although more often than not, I risk 0.5% on an individual stock. Before I discovered the pp, I would risk more than 3% at times.

That's around where I am. I've got about 4% of my portfolio in Tesla (TSLA) which probably isn't a good idea. But I'll consider one stock as my VP and see where that goes as I build my PP around it.

1NV3ST0R wrote: Out of curiosity, for those using a VP, what percentage would you say of your entire portfolio (including VP and PP) would you risk putting into a single company such as Walmart? 2%? 5%? etc.

Try as I might, its very hard to rationalize putting anything into a single stock as an investment.  Stocks are just inordinately risky on an individual basis and the return never, ever makes up for the risk taken.  Hold something long enough though and you'll either get the market average or would have lucked out and hopped onboard an All Star in the making.  But luck isn't an effective strategy.

Now if you were trading, such as growth stocks which have mean reversion after their momentum inevitably ends, then your position size should be based on the size of your trailing stop.  Typically, you don't want to ever risk more than a 1% loss on a position so that would allow for a 4% position size with a 25% trailing stop, 25 total portfolio positions.

1NV3ST0R wrote: That's around where I am. I've got about 4% of my portfolio in Tesla (TSLA) which probably isn't a good idea. But I'll consider one stock as my VP and see where that goes as I build my PP around it.

Have you ever heard the phrase "Love the company, hate the stock"? If I remember right, Tesla is the brainchild of the brilliant young man who is also behind SpaceX. If not, he's running some other commercial space company. But 4%? I don't even keep 4% in AAPL anymore. Why not sell down to 0.5% and spread the rest out?

You are correct in that Tesla and SpaceX were both founded by Elon Musk. I  respect that dude a lot but I understand the love the company, hate the stock. I just see this as roughly all of my VP for now (and a bit in REITs as well). I could be considered a fool for investing a reasonable chunk in it but I understand the risks at least.

On Motley Fool, it has a very low rating and it has a ton of people that are shorting the stock. I see this as a contrarian investing stock in that I'm hoping all of these other people are wrong and when the stock goes up higher, they "cash out" and put the stock even higher. I'm still up around 20% on the stock but it's down from about 45% up about a month and a half ago. I'm interested to see where they go (crossing fingers for AAPL-like explosion, but would settle for a fraction of that).

Looks like my VP of one stock is doing quite well today hah. TSLA is up 6.45%. Hopefully that holds/grows but we'll see. I've got a few months before I would like to take profits to hit the long-term capital gains bracket.

1NV35T0R wrote: Looks like my VP of one stock is doing quite well today hah. TSLA is up 6.45%. Hopefully that holds/grows but we'll see. I've got a few months before I would like to take profits to hit the long-term capital gains bracket.

With negative earnings per share, I wouldn't wait too long.

dualstow wrote:

1NV35T0R wrote: Looks like my VP of one stock is doing quite well today hah. TSLA is up 6.45%. Hopefully that holds/grows but we'll see. I've got a few months before I would like to take profits to hit the long-term capital gains bracket.

With negative earnings per share, I wouldn't wait too long.

I've been holding since around 25 a share or so. It keeps going above and below $30. I'm interested in their cash flow when their new Model S coming out.