Now’s the time to buy Wal-Mart

Article Excerpt

We’ve always had a high opinion of Wal-Mart, but we stayed out of the stock in this decade because it violated the second of our three key rules for investment success: Downplay stocks that are attracting excess attention from brokers and the media. (Just to refresh your memory, our first rule is to invest mainly in well-established companies; our third rule is to spread your money out across most if not all of the five main economic sectors.) From 1996 through the end of 1999, Wal-Mart’s sales and per-share earnings doubled. That drew the attention of huge pension funds that want to invest in growth, but didn’t want to overindulge in the Internet and tech mania of those years. As Wal-Mart gained, momentum traders joined in the buying. Trading and liquidity expanded, and Wal-Mart rose from $10 to $70. At its 2000 peak, it traded above 50 times earnings. Wal-Mart’s sales and per-share earnings roughly doubled in the next seven years, then…

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