Taking Stock- Wal-Mart stores

   Dear Mr. Berko: What do you think about Wal-Mart stock? My broker recommended that I buy 200 shares because he thinks the stock could go to $90 in the coming three years. He points to the company's huge growth in profits and dividends, and those numbers are impressive. He also said that Citigroup, Merrill Lynch, JPMorgan and other large brokerage firms have a buy rating on Wal-Mart. I've followed your advice for the past 25 years and would be more comfortable if you recommended the stock.
-B.W., Gainesville, Fla.

   Dear B.W.: When Merrill, JPMorgan or Citigroup place their imprimatur on an investment, I look extra hard for hidden sand traps and sinkholes. If there truly were any company that is too big to fail, it's probably Wal-Mart Stores (WMT -- $51.75), only because it is so big, well managed, profitable and so much a part of the national landscape that only a takeover by the federal government would cause WMT to fail.
   What can one say about a company where Americans spend $49 million every hour of every day? And every second of every day, WMT earns a net profit of $28. WMT has been so successful that it is now bigger than Home Depot, Kroger, Target, Sears, Costco and Kmart combined. This company has 2.1 million employees (and probably several more thousand by the time this is published) and is the largest private employer in the world. It's also the largest company in the world.
   This company sells more food than Kroger and Safeway combined, and keep in mind that WMT's superior management just began selling grocery products in 1995. And since 1995, 31 supermarkets had to declare bankruptcy. Management has opened 8,125 stores, of which 2,948 are Walmart Super Stores, 693 are Sam's Club and since 2005, WMT has opened almost 400 new stores per year. So this year, WMT's cash registers will ring up 7.2 billion purchasing experiences, and 90 percent of those purchasers live within a 14-mile radius of a WMT store.
The company has more than a billion square feet of floor space and owns all of its real estate. And next to the federal government, WMT occupies more square feet than any public or private entity. There are not enough superlatives in the dictionary to describe WMT. This company is so forward thinking that they know where and how many new stores they will open between now and 2015. In fact, management is so forward thinking that I was told management has an application before the World Congress to reserve locations on Mars and the moon.
Now, while WMT's record of growth and expansion is unmatched (except for Congress), its share price has been a disappointment for millions of investors. Its share price in the last 120 months has never risen above $64. And during that period, its revenues grew 250 percent, earnings increase nearly tripled, its dividend rose fivefold, cash flow and book value grew 300 percent and outstanding shares declined from 4.5 billion to 3.6 billion. And no matter how the cookie crumbles, those impressive numbers are made possible by an exceptionally remarkable team of millions of employees.
   And if WMT were to run Congress, there's little doubt that within a couple of years, the country would be running a profit and taxes would be significantly reduced. However, if the past is prologue, then that's all the reason to believe that WMT's share price will not exceed $64 in the coming three years. Don't buy the stock.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, FL 33429 or e-mail him at mjberko@yahoo.com. To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com. COPYRIGHT 2008 CREATORS SYNDICATE, INC.


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