Wal-Mart: Fundamentals Matter

08/05/2015 7:00 am EST

Focus: STOCKS

We've seen major geopolitical developments concerning Greece, China, and Iran. On a daily basis the media was wringing their hands over these events, suggests long-term value investor Russ Kaplan, editor of Heartland Advisor.

However, the actual conclusion in each case has, so far, had a minimal impact on the stock market, showing that an analysis of individual companies and not world news is the best way to invest. 

It’s the basic investment fundamentals of companies that matter. For example, consider our newest recommendation, Wal-Mart (WMT). I first started buying the stock back in 2005.

At that time, the concern was that Sam Walton had just died and nobody else could run the company. This proved to be false and Wal-Mart continued to prosper.

Now there is the issue of competition with Amazon (AMZN) as people stay home and buy things online. This caused Wal-Mart to fall from a high of $91 per share earlier this year to a recent price of $73.50 per share.

I feel this is an overreaction and early evidence is showing that Wal-Mart's Web page is just as effective as Amazon. It is another case of good companies being able to adapt. Besides, if you have ever been at a Wal-Mart, they are usually very busy.

Wal-Mart is a financially solid company with a Value Line rating of A++, which is the highest level.

No one can say the company is not profitable with a return on equity of 21%, much of it attributable to its neighborhood stores, which have been highly successful.

The company officers and directors own 51% of the shares so there is a long-term commitment in place. Wal-Mart pays an above average dividend so it is appropriate for income-oriented investment.

In addition, Warren Buffett's Berkshire Hathaway (BRK-B) owns 60,385,293 shares of Wal-Mart and it is usually good to be on the same side as Buffett.

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