Low, low prices! Wal-Mart (NYSE: WMT) stock is on sale at an approximate 25% discount to their intrinsic value. I picked up shares yesterday at $52.65. Here’s a look at Wal-Mart’s last 10 years of Free Cash Flow (‘Owner Earnings’ as described by Warren Buffet in this link)
The current price of Wal-Mart shares trade today within cents of the close in 2000. However, earnings and dividends have increased 202% and 508%. Is this enough to warrant purchase? Is the yield high enough with the continued growth? The average dividend increase over the last seven years is over 14%. The current yield is 2.7%. This yield is at least as safe as a US government bond in my opinion.
Using my Kelly Formula Stock spreadsheet, I put 5% of my portfolio into WMT.
WMT has jumped today along with the rest of the market. If you can catch it again below $52.70 I think you’ve got a very good buy.