It should surprise exactly no one that Wal-Mart (NYSE: WMT) attracts a lot of institutional and retail investor interest -- it's a $185 billion retailer with operations in more than 15 countries. What did surprise me, though, was that last year, it was the No. 20 most-owned stock by investment clubs, as measured by the folks at Better Investing. If retail investors were high on the stock, it got me to thinking: What's the consensus sentiment view on Wal-Mart?
Turns out, the view is mostly bullish. Let's have a look at a few of the key sentiment drivers.
1. Analyst opinion
Analysts like Wal-Mart. Data from Capital IQ captures their collective feeling:
|
Opinion |
Number of Analysts |
|---|---|
|
Buy |
17 |
|
Outperform |
2 |
|
Hold |
12 |
|
Underperform |
0 |
|
Sell |
1 |
|
No Opinion |
1 |
Nineteen analysts have either a "buy" rating or an "outperform" on the stock -- the majority sentiment. A fair portion (12) of the analyst crowd deems the stock a neutral "hold," but there's just one "underperform" or "sell." We'll classify analyst sentiment as bullish to neutral.
2. Insider buying
Next we'll look at insider buying and selling. Over the past year, Wal-Mart insiders have sold $16.46 million worth of their company stock. During the same time period, insiders bought $1.07 million in Wal-Mart shares. (Data from Form4Oracle.)
While it'd be nice to see a bit more insider buying to balance out the selling, the truth is, $15.4 million of net selling isn't all that meaningful relative to the company's $185 billion market cap. Plus, insiders sell stock for a whole host of reasons -- to pay for a house or tuition, to diversify assets, and so forth. For purposes of this exercise, we'll classify insider buying/selling as neutral-leaning-bearish.
3. Guru buying
Next, we'll look at "guru" ownership of the stock, according to GuruFocus.
In the quarter ended Dec. 31, three gurus were buying Wal-Mart shares, including George Soros and Tom Gayner. There were no sellers in that quarter. In the previous quarter, four gurus were trading Wal-Mart: two buyers, two sellers.
The balance is clearly in the "buy" camp, so we'll classify guru buying sentiment as bullish.
4. Retail investor community sentiment
For retail investor community sentiment, I turn to Motley Fool CAPS, our proprietary stock rating system. CAPS generates ratings on a one- to five-star scale, with five stars as the highest ranking, indicating that the Fool community believes in a stock's future. Wal-Mart has a neutral three-star rating.
5. Short-sellers
Next we'll look at whether short-sellers are circling the stock. There are 29.9 million Wal-Mart shares sold short, according to Capital IQ. As a percentage of shares outstanding, that's a short interest of 0.8%. That's not at all high, and so for determining sentiment, we'll classify the low short interest as bullish.
6. Does Buffett own it?
This is the "cherry on top" test, and in this case, it's a resounding yes: Berkshire Hathaway does own shares of Wal-Mart. In fact, it's the fifth-largest shareholder, with a more than 1% stake.
Adding it up
The consensus opinion on Wal-Mart is "mostly bullish." Analysts, gurus, and Warren Buffett like the stock, and in another bullish sign, short-sellers are staying away. The CAPS community is only neutral on Wal-Mart, and insiders -- while net sellers -- have a mostly neutral bearing on sentiment as well.
Of course, you can't base an investment philosophy on who likes or dislikes the stock you own, and even a consensus bullish opinion can sometimes be a scary thing. Quoting Buffett: "A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful."
The purpose of this series of articles isn't to make a definitive buy-or-sell call on Wal-Mart. Rather, by looking at a stock's sentiment, the goal is to help you place your own opinion of it in a broader context.
One final thing: If you want to keep tabs on Wal-Mart's movements, and for more analysis on the company, make sure you add it to your Watchlist.
