I'm one of those vultures that scour the new 52-week low list looking for investment ideas. It's a thankless chore because, quite frankly, most of the stocks hitting the deck with a resounding splat have a darn good reason for doing so.
But what are we to make of the recent flop of a little outfit called Wal-Mart
So what's the big problem? Darned if I know. Earnings for the past year were up a hearty 19% over the year before, on an 11% increase in revenues. That might seem slim, but remember that Wal-Mart is the world's biggest retailer because it's the world's most efficient retailer.
Though the firm has been at this for years, it continues to find ways to earn more. Gross margins continue to climb, hitting 23.7%, the highest they've been in seven years. Net margins, at 3.6%, are also at a seven-year high. With consistent, admirable returns on assets, equity, and capital (9%, 23%, and 13%, respectively), this is a company that's done everything right for a long, long time.
I don't think there's much danger of competition from Target
As the nation's low-price store of choice, Wal-Mart does pretty well no matter what the consumer mood. In fact, there are good reasons to believe it's a counter-cyclical hedge: If shoppers feel pinched, Wal-Mart should pick up business from some of the purveyors of upscale goods. Factor in growth potential overseas, and it would be silly to assume that Wal-Mart's best days are behind.
Sometimes the market freaks out and forgets stocks that have treated it well. It's rare to see them sitting in plain sight.
For related Foolishness:
Seth Jayson is a member at Sam's Club, but at the time of publication, he had positions in no firm mentioned. He is a proud member of the extended Inside Value newsletter family, which is probably eyeballing Wal-Mart about now. View his stock holdings and Fool profilehere. Fool rules arehere.