Wednesday, July 25, 2012

Buffett Has Success with Walmart

By Swagato Chakravorty
Monday, July 23rd, 2012

The Oracle is at it again.

Back in 2009, Warren Buffett bought 17,892,342 shares of Walmart (NYSE: WMT) stock at around $50 per share. That was in the third quarter.

In the fourth, he bought another 1,200,500 for around $52.50. Finally, he bought 7,671,000 shares for $61 in early 2012, almost precisely before Walmart stock jumped to $72.31.

This year alone, Walmart’s stock has risen by 21 percent so far, making Buffett look, as usual, eerily prescient.

Walmart has done fairly well, increasing revenue each year over the past ten years to hit $447 billion in the fiscal year 2012. Every year since 1974, Walmart has increased its dividend, and this year is no different—the board increased it to $1.59 per share.

According to Nasdaq, GuruFocus had estimated Walmart’s value in 2011 to be $78, with an assumption of 10 percent EPS growth and 3 percent terminal growth over the coming decade.

Currently, Walmart is trading at slightly over $71.

Along with Walmart’s return to market prominence, Berkshire Hathaway’s (NYSE: BRK.A) stocks have steadily risen by more than 10 percent this year. Each stock now costs $125,321, and that represents a record high in 16 months.

As recently as May 4, Berkshire stated that its net revenues were at $3.2 billion, which makes this a third straight year of such increases. Plus, operating earnings were $2.7 billion, a great improvement over last year’s equivalent-period earnings of $1.6 billion.

Berkshire benefits from Buffett’s visionary guidance. The man has repeatedly shown confidence in America and the American market.

Speaking to CNBC, he expressed his belief in a resurgence within the housing market, as well as indications that investors are seeking safer ground as the American economy continues to shrink for the present.

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