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Thursday, September 07, 2006

Wal-Mart's Silly Little Rally (WMT)

Stocks: (WMT)(MO)(T)(BUD)

What's up with Wal-Mart? The market has been trending down and Wal-Mart has moved from $44.50 to $45.50 in the last five days. It even hit $45.75 on the way.

The move may not seem like much, but for a company with a $190 billion market cap, it is.
Wal-Mart's US same store sales were up 2.7% but everyone already knows that. It is "priced in". Consumer spending was up .8% in July, but, according to the Associated Press, most of that increase was in the automotive sector.

Wal-Mart also will offer more customer goods to appeal to different demographic groups, according to the Wall Street Journal. But, that plan is unproven, and, as a departure for normal activity, it could be a risk.

Wal-Mart does have a forward P/E of under 14, and in a down market that may be attractive along with the 1.5% yield the company has.

During the last five days, the Nasdaq has had a high of about 2207 and dropped to 2250 today. So, there may be some safe harbor aspects to picking up WMT. But, some of the other safe stocks like Altria, AT&T, and Anheuser-Busch have not mirrored Wal-Mart's rise.
If the stock is moving up on same-store sales, it will probably go back down again. With the housing market going to pieces and gas prices still around $3 a gallon, there is not news to sustain a move up in the shares of the big retailer.

Douglas A. McIntyre can be reached at He does not own shares in companies that he writes about.

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