For the decade from 2002 to the end of 2011, Walmart Stores
Inc. (
WMT
) shares went virtually nowhere, remaining in the upper $50
range. In fact, a year ago FPA Capital Adviser's
Steven Romick called the company
an "infinite duration bond with a rising coupon." Recently,
investors have jumped on the Walmart bandwagon and the stock
increased 21% year to date, approaching fair value and making
Warren Buffett
richer.
Buffett increased his holding of Walmart by 17,892,342 shares in
the third quarter of 2009 at an average price of $50, and again
by 1,200,500 shares in the fourth quarter at an average price of
$52.50. He then brilliantly bought 7,671,000 shares at an average
price of $61 in the first quarter of 2012, just before the stock
surged more than $10 to $72.31 at latest quote.
At the new price, Walmart is approaching fair value. While its
stock price remained flat for a decade, Walmart's EBITDA grew at
11.3%, and it had record earnings per share of $4.54 in fiscal
2012. In 2003, Walmart's P/E was as high as 33. When Buffett
bought more in the first quarter, the P/E was around 13, near its
10-year low. The P/E has since risen to 15.5.
Walmart's revenue has increased each consecutive year, including
through the recession, for the last decade, to a record $447
billion in fiscal 2012. Its gross margin has also been on a
widening trend.
Walmart continues to increase its dividend in 2012. In March, its
board approved an increase from $1.46 to $1.59 per share in
fiscal 2013, an equivalent of paying about $5.52 billion. This
continues the company's history of increasing its dividend every
year since 1974. Last year, it raised its dividend 20.7%. The
company also bought back $6.3 billion worth of shares in fiscal
2012.
Last year,
GuruFocus valued Walmart
with a fair value of $78, assuming a 10% EPS growth rate over the
next 10 years and 3% terminal growth rate. Today it trades for
just over $72, near fair value, with a reduced margin of safety.
Now, GuruFocus' valuation tab shows the stock's price as higher
than its valuation numbers. Its Graham Number is $39.26, Peter
Lynch Fair Value is $38.10 and Intrinsic Value (DCF) of $58.63.
Yesterday, Buffett's company, shares of Berkshire Hathaway (
BRK.A
)(
BRK.B
), rallied too, to their 16-month high. The stock is up more than
10% year to date to $125,321 for one share. On May 4, Berkshire
announced improved operating earnings of $2.7 billion, up from
$1.6 billion in the first quarter of 2011. Net earnings were $3.2
billion, up from $1.5 billion the prior-year quarter, marking the
third consecutive year of increases.
In his CNBC interview this morning, Buffett said he was more
concerned that the U.S. economy is shrinking and growth slowing
as consumer spending begins to sow and affect businesses. This
could be pushing investors toward "safer" stocks of large
companies. Buffett also believes that housing is picking up,
which would benefit Berkshire, which owns the largest home
builder, Clayton Homes.
Berkshire Hathaway has a Graham Number of $116,768 and no
Intrinsic Value (DCF) or Peter Lunch Value.
Buffett says he is still optimistic about the economy in spite of
the slowdown. "I love owning businesses in the United States.
We'll invest $9 billion almost in the United States almost at
Berkshire this year. I am a bull on America. We have to run it
right, that's all,"
he said
.
See Warren Buffett's current portfolio here. Also check out the
Undervalued Stocks, Top Growth Companies and High Yield stocks of
Warren Buffett.About GuruFocus: GuruFocus.com tracks the stocks
picks and portfolio holdings of the world's best investors. This
value investing site offers stock screeners and valuation tools.
And publishes daily articles tracking the latest moves of the
world's best investors. GuruFocus also provides promising stock
ideas in 3 monthly newsletters sent to
Premium Members
.