Is Now the Time to Buy Walmart?

I like to file all my investment strategies under the very simple WWBD: What Would Buffett Do? Buffett buys sounds companies that are undervalued. He avoids flavors of the week and he eschews high-risk trades. So what would he do with a stock like Walmart

today?

First, the news. Wal-Mart Stores reported a 2.9% drop in its fiscal third-quarter net income. It missed its earnings target, dropping its quarterly earnings to $3.34 billion, or $0.96 per share, from $3.44 billion, or $0.95 per share, in the year-ago quarter. It did so despite an increase in sales, which grew to $109.52 billion from $101.24 billion. Factor in membership fees, and its revenues grew to $110.23 billion from $101.95 billion. Analysts were expecting $0.98 a share on sales of $107.86 billion. They met their sales goals and missed their earnings, even though their earnings grew. Got that so far? For the fiscal year, Wal-Mart projects earnings of $4.45 to $4.51 per share from continuing operations; versus analysts' estimates of $4.50 per share. That leaves two thoughts. One, Walmart is going to miss analysts' earnings estimates for the year. That could drag the stock down more. Two, Walmart could be slow-playing its earnings. After an under-performing quarter, hitting the $4.51, or even beating that, would drive Walmart's stock up, wouldn't it? Now, what's the most important time of the year for retailers? If you said Christmas, congratulations. You did your homework. The Christmas season starts in earnest in about a week. We have no way of knowing ahead of time which companies will prosper and which ones will fall short, but we can take some educated guesses. We know that the economy sucks right now. The fundamentals have shifted around here and there, but the overall sentiment is still that this economy is junk. Yet, people are still going to buy presents. Santa will not disappoint. Those presents have to come from somewhere. In my mind, when I think "where can I get inexpensive presents for everyone?" I immediately think of two stores: Walmart and Kmart

. Dollar stores also come to mind, but I don't think they offer the same bang for your buck, at least not for Christmas gifts. For everyday items? Yes. But Christmas gifts? I just don't buy it. Back to Walmart. I think any investor has to look at today's numbers and ask themselves where Walmart will be in three months, or six months, or a year. Is the economy going to improve so vastly that Americans will turn to other sources for groceries, for household items, for toys, etc? I don't think so. Of course, that doesn't mean the stock is priced right for your investment strategy. But given that it has shaved off 2.5 percent (as of posting time) Tuesday, and given the possibility of an upswing over time (particularly after Christmas numbers come out) it is at least a stock worth investigating. Would Buffett buy it? If the math is right, he certainly would. Run the numbers and see if Walmart fits in your investment strategy.