Gathering New Information about Stocks, Health, and Sports

          It is fall. Students are heading back to school, employees back to work, and Wal-Mart (WMT) back to a new growing season. For the next few months, as investors, you can expect Wal-Mart to increase at dramatic rates yielding high capital gains. Typically during this period of the year with back to school sessions, Wal-Mart is rewarded with its school specials in terms of higher profits and revenues. While the action is short lived and only lasts a few months, the real benefit with Wal-Mart comes from the economics involved.
          During recessions, discount stores such as Wal-Mart typically earn more than other luxury departments because of a variety of factors. Higher unemployment leads to fewer jobs which lead to less income which eventually leads to less money to allocate to expensive items. Instead of purchasing an expensive shirt from Tommy Hilfiger for example, the majority of consumers during a recession will look at Wal-Mart brand items and purchase these. With already high margins year after year, investors should look for even larger ones in the next few quarters with a recession looming.
          While such information is nice to know if you are part of management for this corporation, you may be thinking how this piece of knowledge will transfigure into your portfolio. Since during a recession discount stores usually have increased sales which transcends to increased profits, shares will rise on the developing good news. If a recession is long and hard, the situation may become even more favorable for Wal-Mart in an ironic way. During the last recession around 2001 to 2002, shares of Wal-Mart rose nearly 40%: a steady but favorable rise. While the stock has tinkered off a bit during the recent plague of inflation, with the departure of stores from its German location, expansion into more emerging markets such as China, and cost saving tactics resulting from employee handling and increased productivity, Wal-Mart looks to be oversold at its current reading. Leaving Germany may have looked unfavorable to investors in the short run but the cost cutting technique will only result in higher opportunities in the future for Wal-Mart.
          Thus, with the paradoxical, but favorable, economic downturn, cost saving processes, and a technically sound reason along with positive fundamentals, I really would encourage investors to look into buying Wal-Mart. While the potential to earn big in this company is marginally smaller then during the glory days of the 1990s, Wal-Mart still presents itself as a safe stock to purchase. As a large cap stock during favorable times as well as stock eager to give out dividends, all the indications are positive in terms of making a bit of capital gain with this potential future monopoly.

-Dennis Biray
September 1st, 2006