Walmart -WMT -Oversold & Valuation Compelling at 0.50x's Sales
Walmart has bottomed consistently at 0.50x's Sales since late 2012, with each swoon holding perfectly at that level.
Given the size of Walmart and the breadth of shareholders and analyst coverage, it is logical that investors have stepped in and defined a specific level of valuation for which they will continue to buy shares. I have done this analysis in GM shares too. Look for the link below.
On Friday, I published a chart, but without going into the specifics of this 0.50 level of PSR, so I am producing this chart again with this additional detail.
The ENTRY here is right in the middle between the upside target of 0.55x's sales and the base at 0.50x's sales. Therefore, the risk is equal to the reward. But what would make you want to take even odds is that the probability of reaching the target is greater than reaching the support. Why? Because the chart has been coming down steadily and the overall market, as measured by the S&P500, has gone on back to the all time highs. There is a divergence here that spells an opportunity. I love to buy technically ugly and oversold charts when the valuation is compelling.
The stop loss I listed before would have had you selling right at the key 0.50x's sales level, which isn't logical, so I am amending that and I would suggest adding to this position with a stop at 72-71 instead of at 75. The trade becomes more and more interesting as the price drops to the $75 level because the upside becomes 10% instead of 5% and the risk remains low.
Earnings are due on 5/19 and that may raise the level where the 0.50x's PSR level is, so pay attention closely this coming week.
All the best,
Tim Saturday 10:49AM EST, May 16, 2015 WMT 79.24 last.
Given the size of Walmart and the breadth of shareholders and analyst coverage, it is logical that investors have stepped in and defined a specific level of valuation for which they will continue to buy shares. I have done this analysis in GM shares too. Look for the link below.
On Friday, I published a chart, but without going into the specifics of this 0.50 level of PSR, so I am producing this chart again with this additional detail.
The ENTRY here is right in the middle between the upside target of 0.55x's sales and the base at 0.50x's sales. Therefore, the risk is equal to the reward. But what would make you want to take even odds is that the probability of reaching the target is greater than reaching the support. Why? Because the chart has been coming down steadily and the overall market, as measured by the S&P500, has gone on back to the all time highs. There is a divergence here that spells an opportunity. I love to buy technically ugly and oversold charts when the valuation is compelling.
The stop loss I listed before would have had you selling right at the key 0.50x's sales level, which isn't logical, so I am amending that and I would suggest adding to this position with a stop at 72-71 instead of at 75. The trade becomes more and more interesting as the price drops to the $75 level because the upside becomes 10% instead of 5% and the risk remains low.
Earnings are due on 5/19 and that may raise the level where the 0.50x's PSR level is, so pay attention closely this coming week.
All the best,
Tim Saturday 10:49AM EST, May 16, 2015 WMT 79.24 last.
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