Wal-Mart is truly a steady grower of Owner Earnings.  This is exactly the type of stock Buffet likes to buy, because it is easy to project these cash flows into the future.I calculate Wal-Mart’s Intrinsic Value at $70.30 per share.  Given the steady growth of earnings, I was willing to buy at a 25% discount (my minimum discount) to this value, or $52.70 per share.

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.