​Was Buffett Right in Selling Walmart?

William Corley  |

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This time last year, Warren Buffett’s company, Berkshire Hathaway, owned over $3 billion in Wal-Mart (WMT) stock. In 2014, WMT was one of Mr. Buffett’s top 5 equity holdings. Now, Buffett owns under a $100 million of the stock. It appears his lack of interest in the stock is twofold. WMT’s stock price has trailed the S&P 500 by 14%, and Berkshire Hathaway by 18%; WMT has been a drag on Berkshire’s 12 month performance. Also, Mr. Buffett appears to be concerned that the pace and scope of Amazon’s (AMZN) disruption to the retail sector is a might force. AMZN reported a 27% increase in annual sales and generated $16.4 billion in operating cash flow, sending its stock price to record highs. AMZN is a behemoth whose growth feels viral.

WMT is thought of as a brick and mortar retailer whose time has passed. To some, WMT is perceived as a darling of the past, but a dog of the future. Value investing isn’t for everyone, but it was foremost in Mr. Buffett’s strategy to build his financial empire. Sears (SHLD), Dillard’s (DDS), Macy’s (M), JC Penney (JCP) and other major department stores have witnessed their share prices fall into a bear market. WMT is up 11% over the past year. WMT’s stock price is up 4.44% over the past week and 8.1% in February. Walmart posted strong financial results for the quarter with e-commerce growth of 27% and operating cash flow of $31.5 billion. WMT has been aggressively making acquisitions in the ecommerce space both domestically and internationally. Amazon is a retail evolutionary, media power, and tech innovator. It sports a current market-cap of $405 billion with a 173x trailing p/e ratio. Walmart is yesterday’s retail swan song. It is currently valued at $220 billion and trades at 16x times its reported earnings. WMT pays a 2.86% dividend that has risen 44 consecutive years. I own both.


DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer.

Companies

Symbol Name Price Change % Volume
M Macy's Inc 16.98 0.11 0.65 2,093,768 Trade
SHLD SHLDQ Sears Holdings Corporation n/a n/a n/a 0
DDS Dillard's Inc. 69.70 0.16 0.23 30,520 Trade
JCP J.C. Penney Company Inc. 0.81 0.00 0.34 646,050 Trade
WMT Walmart Inc. 116.46 -0.14 -0.12 514,729 Trade
AMZN Amazon.com Inc. 1,860.72 7.47 0.40 781,303 Trade

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