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Holly LaFon
Holly LaFon
Articles (8153) 

Warren Buffett Wins as Berkshire and Walmart Rally

July 12, 2012 | About:

For the decade from 2002 to the end of 2011, Walmart Stores Inc. (NYSE:WMT) shares went virtually nowhere, remaining in the upper $50 range. In fact, a year ago FPA Capital Adviser’s Steven Romick called the company an “infinite duration bond with a rising coupon.” Recently, investors have jumped on the Walmart bandwagon and the stock increased 21% year to date, approaching fair value and making Warren Buffett richer.

Buffett increased his holding of Walmart by 17,892,342 shares in the third quarter of 2009 at an average price of $50, and again by 1,200,500 shares in the fourth quarter at an average price of $52.50. He then brilliantly bought 7,671,000 shares at an average price of $61 in the first quarter of 2012, just before the stock surged more than $10 to $72.31 at latest quote.

At the new price, Walmart is approaching fair value. While its stock price remained flat for a decade, Walmart’s EBITDA grew at 11.3%, and it had record earnings per share of $4.54 in fiscal 2012. In 2003, Walmart’s P/E was as high as 33. When Buffett bought more in the first quarter, the P/E was around 13, near its 10-year low. The P/E has since risen to 15.5.

Walmart’s revenue has increased each consecutive year, including through the recession, for the last decade, to a record $447 billion in fiscal 2012. Its gross margin has also been on a widening trend.

Walmart continues to increase its dividend in 2012. In March, its board approved an increase from $1.46 to $1.59 per share in fiscal 2013, an equivalent of paying about $5.52 billion. This continues the company’s history of increasing its dividend every year since 1974. Last year, it raised its dividend 20.7%. The company also bought back $6.3 billion worth of shares in fiscal 2012.

Last year, GuruFocus valued Walmart with a fair value of $78, assuming a 10% EPS growth rate over the next 10 years and 3% terminal growth rate. Today it trades for just over $72, near fair value, with a reduced margin of safety.

Now, GuruFocus’ valuation tab shows the stock’s price as higher than its valuation numbers. Its Graham Number is $39.26, Peter Lynch Fair Value is $38.10 and Intrinsic Value (DCF) of $58.63.

Yesterday, Buffett’s company, shares of Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B), rallied too, to their 16-month high. The stock is up more than 10% year to date to $125,321 for one share. On May 4, Berkshire announced improved operating earnings of $2.7 billion, up from $1.6 billion in the first quarter of 2011. Net earnings were $3.2 billion, up from $1.5 billion the prior-year quarter, marking the third consecutive year of increases.

In his CNBC interview this morning, Buffett said he was more concerned that the U.S. economy is shrinking and growth slowing as consumer spending begins to sow and affect businesses. This could be pushing investors toward “safer” stocks of large companies. Buffett also believes that housing is picking up, which would benefit Berkshire, which owns the largest home builder, Clayton Homes.

Berkshire Hathaway has a Graham Number of $116,768 and no Intrinsic Value (DCF) or Peter Lunch Value.

Buffett says he is still optimistic about the economy in spite of the slowdown. “I love owning businesses in the United States. We’ll invest $9 billion almost in the United States almost at Berkshire this year. I am a bull on America. We have to run it right, that’s all,” he said.

See Warren Buffett’s current portfolio here. Also check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of Warren Buffett.

Rating: 2.5/5 (8 votes)


Sonya1 - 5 years ago    Report SPAM
Dear Warren

Thank God for epiphanies and seekers for the truth.

Where do I start, the reason I reject orange doom?

Back in my hometown when I was a teenager, I had a crush on a local drug dealer at the time I didn’t know he was a local drug dealer, he rode around in shiny new cars, I left and when to school came back and went on the road for 6 years learned the art of persuasion, came home perfected my crafted and have been in the private sector every since. 75% of the time I’ve been in some kind of management capacity, life in general to me is a piece of cake. I’ve always seek out the best for everything.

The biggest mistake I ever made was looking at the genocidal maniac, worst mistake of my life. He draw me into his family and tried to play me like a lightweight until he quickly found out I had amazing skills and I would tell you to kiss my a_ _ super quick.

So I walked away, he wasn’t use to that and I was chubby so he found it offensive.

That’s when the stalking begin, one day the lady he was seeing, they stood out on the porch of her house, the next day I stopped by her place so she could tell me more about this sicko I was quickly beginning to understand, she invited me into her house I refused. A week or so later he had her to go and put a restringing order out on me, the judge throw it out there was no merit to it, after that I knew I had a psychopath on my hands. I didn’t know how incredible powerful he would be, my phone was tapped house bugged and a stalker tail that would never end till this day, it started in 1994, I haven’t had one day without them since. In 2000 I made a command decision to leave to save my own life, they followed me to Reno and have been active the whole time I’ve been here. That’s when they discovered Latinos and took the madness to the stratosphere.

Once they had there latino demons in place multiple crews they took out the original player genocidal maniac, the latino power was born by keeping everything in place even the contract on my head, then there was no connection so they publicly murdered me where I stood with extreme torment, I have 0 tolerance for it and justice is my driving force.

They took this campaign of terror to the airwaves and become prolific by exploiting my very movements, (red&black) was born from Jeff Goldblum in the lost world with Steven Spielberg. Who just took a bow when they just caught up with me recently.

President Obama has known about this game (takeover) the entire time I told him when he was candidate Obama, he refuse to deal with the issue period. The game is about this sadist racist latino stalker that stalks with extreme aggression and violates my constitutional rights 24/7 now that manifest a 100% of everything I do exploits it by having any Latina in my face act it out on screen to glorify his own sinister agenda, thank God Bill can see this real national threat to our nation’s security now.

They use Black America and White America in that order as target practice and a cerebral assassin to me directly fighting for my life daily.

I have two words for you: Lacey Peterson

I need you and our crew.

Love Sonya

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