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WAL MART

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Instrument:WAL MART
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Walmart is the world’s biggest retail chain as well as the largest corporation in the world in terms of revenue, as of October 2020. So large is Walmart that its annual revenues are more than three times that of its nearest competitor, France’s Carrefour. The retail giant was founded by Sam Walton on July 2nd, 1962, and it is headquartered in Bentonville, Arkansas USA. As of October 2020, Walmart is the largest private employer in the world with over 2.3 million employees, and the company serves over 265 million people every week through their eCommerce sites and over 11,500 stores located in 27 countries around the world.  While Walmart is a giant retailer now, the beginnings of Walmart were rather humble. The vision of Sam was creating stores that will price goods cheaply and focus on high volume.

The decision to initially open stores in rural areas was also spot on. It ensured Walmart never came into direct competition with established retailers at the time, such as Kmart and Sears, and it also drew customers from a large radius who appreciated the company’s appealing concept. By the end of the 1960s, Walmart had 18 stores, and in the 1970s, the company implemented an ingenious warehousing distribution strategy that allowed it to execute its mission. The strategy involved building huge warehouses that would serve as a distribution point for surrounding stores, allowing the company to buy in volume and further enjoy the economies of scale. By the end of the 1970s, Walmart had hit revenues of $1 billion (the quickest company to do so at the time), and their stores were operating multiple other businesses, such as groceries, auto service centres, pharmacies, shoe departments, as well as jewellery divisions.

The 1980s saw the introduction of Sam’s Club (membership-only warehouses) and Walmart Supercenters (stores that sold all types of merchandise in a space that was as large as 6 football stadiums). By 1990, Walmart was the biggest retailer in the US. The company started its international expansion in 1991, and by 1999 it was the largest retailer in the world. By 2001, Walmart became the largest company in the world when its revenues eclipsed that of Exxon Mobil. Walmart went public on October 1st, 1970, listing on the NYSE where it trades under the ticker symbol WMT. It is categorised in the Consumer Defensive sector, under the Discount Stores industry.

An active portfolio has been one of the major reasons Walmart has managed to accelerate its growth to the top. In previous years, Walmart made acquisitions when entering a new market, but in recent years, the company has tended to buy into the lucrative eCommerce space to fend off companies such as Amazon. Its major buys include Flipkart for $16 billion, Jet.com for $3.3 billion and CareZone for $200 million. Walmart has also made notable divestitures, for example, the sale of the McLane Company to Berkshire Hathaway for $1.5 billion.

Walmart Stock History

Walmart’s stock went public with an introductory price of $16.50. Since then, the company has had eleven 2-for-1 stock splits – 3 in the 1970s; 5 in the 1980s; and 3 in the 1990s. The company’s exponential growth can be seen in its stock price. From a split-adjusted price of below $1 in the early 1980s, the company broke above $10 in 1991 and largely traded sideways until the end of 1996. It then embarked on a sharp uptrend that topped out at circa $70 by the turn of the millennium.

A period of consolidation then followed, until 2018, when the psychological $100 barrier was breached. The stock then continued trending higher, hitting its all-time of just below $150 in September 2020. Walmart is a dividend-paying stock. The company pays a quarterly dividend to investors and has adopted a dividend policy of consecutive annual boosts.

Walmart first paid a dividend of $0.05 in 1974, and since then, it has increased its annual cash dividend payouts to investors every year. The company is the ultimate “Dividend King” on Wall Street. Buying dividend-paying stocks, such as Walmart, gives investors unique advantages as the regular income can cushion against bearish stock prices, and there is still room for additional gains in the form of stock price appreciation.

How to Trade the Walmart Stock

Here are the factors to consider when trading the stock of one of the biggest companies in the world, Walmart:

  • Trade and Tariff Agreements
    Walmart has a presence in multiple jurisdictions and sources its goods from numerous countries around the world. This means that the company has to navigate numerous trade and tariff agreements, and changes in that regard may have a significant impact on their overall margins.
  • Legislative and Taxation Issues
    As the biggest company in the world, as well as a major employer, as of October 2020, Walmart is a target of numerous legislative and taxation policies. Laws in different countries and areas, such as minimum wage or targeted taxation, can have a huge impact on their revenues and profits.
  • Competitor Performance
    Walmart faces competition in multiple retail sectors, such as grocery eCommerce, brick and mortar supermarkets, as well as membership warehouses. The company may lead its competition at the moment, but it is important to watch out for competitor performance in the various spaces that Walmart operates in.
  • Negative PR
    Walmart is an easily recognisable brand in the world, but its image has suffered over the years as the company grew into the world’s biggest company. There have been controversies around the wages it pays its employees and its anti-union stance, the impact it has had on small businesses in places where it has opened Supercenters, their foreign product sourcing, as well as their security protocols.
  • Periodic Earnings
    Walmart’s fiscal year runs from February to January. The company releases quarterly earnings, which include reports on revenues, costs, dividends, and occasionally, their future outlook. It is important to track the Walmart earnings calendar to get a picture of how the business is performing.

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Walmart Stock FAQ

  • Why should I trade Walmart shares?

    As the world’s largest brick and mortar retailer Walmart shares are well worth watching. This becomes especially true around the holiday shopping season. The company has also become fairly successful in the ecommerce side of their business, and has also grown to be the largest seller of groceries in the U.S. Taken all together Walmart remains a powerful growth engine, despite its massive size. Shares also enjoy great popularity, with millions of shares changing hands daily.

     
  • Is Walmart the best retail stock for trading?

    There are many retailers that you can trade because it is a crowded and competitive space. And some will likely be better than Walmart for trading from time to time. But Walmart will consistently remain a good stock for trading. Even during the period from 2000 through 2015, when the stock remained primarily range bound, it remained a good choice for traders of all styles. The current price action as 2020 comes to a close is even better though, and most traders should be able to find a strategy that potentially helps them profit from trading Walmart shares.

     
  • What’s the best strategy for trading Walmart shares?

    Since Walmart shares have been trending higher since 2015 the best strategy for trading the stock is one that is trend following in nature. Momentum trading strategies can also work, especially during periods where Walmart shares become stronger than average. The best trend following strategies prescribe trading only in the direction of the trend, so for as long as Walmart shares continue rising the best way to speculate on the stock is by taking long positions. These are best entered during price dips, and entries can be determined using various technical indicators, such as the RSI or the MACD.

     
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