!! Have a look at Walmart !!

Readers.......Now that USA markets are open to Indian investors; please read this blog if you are inerested in investing in USA markets. I have been in USA for last 5 years and have been investing over here for more than 2 years now. Time - to - Time I love to invest in companies that are very profitable but extremely hated by the larger community due to several reasons. As a result their stock prices are depressed and sell at a significant discount to the company's intrinsic value. One such company in USA is Walmart. The company is hated by analysts and mutual funds because their same store sales growth is flat, labor unions and politicians have created lot of negative publicity for the company,etc ,etc.......

However; if you can clear the rhetoric and focus on its business and balance sheet it is a true hidden giant (.......I cannot call it a hidden gem because it is too big to be called a gem). Their business model is as robust as it was a decade ago, the profitability and cash flow generation is awesome and the company is still growing in low double digits inspite of the fact that it has 300+ billion dollars in revenue last fiscal.............Mind Blowing...........

I am not going to explain about the valuation technique in this blog. Joe Ponzio had explained it very nicely in his blog mentioned below.

http://www.fwallstreet.com/blog/44.htm

I follow his blog regularly and I can tell you that Joe is an excellent writer. If you are interested in learning about value investing I recommend that you read his blog from time to time.....It is refreshing

Two (2) things Indian Investors need to keep in mind before they try to invest overseas.......

1) The dollar has been loosing ground against rupee. Goldman Sachs estimates that India's currency could appreciate approximately 281% against the dollar by 2050. That means on an average the rupee will appreciate against dollar annually at 2 - 3% over the next 43 years which will automatically reduce the value of your investment by that amount. Review Goldman Sachs BRICS report below

http://www2.goldmansachs.com/insight/research/reports/report32.html

The report is presented on the right hand side under the title "The BRICs Dream:Web Tour". Slide # 10 talks about the exchange rate for India which I have mentioned above.

2) The growth rates in mature markets is much less than that in emerging markets. Hence, it is very unlikely that we will see the kind of spectacular returns in slow growth companies like Walmart as we are used to seeing in Indian stock markets.

However..........if you have a very large portfolio and you want to diversify your risk it does make sense to invest in stable and profitable companies overseas especially when all the emerging markets are so much overheated. Walmart's fair value is estimated at approx $56/- with 15% discount value. At today's price of $44/- Walmart is approx trading at 20% discount to it's fair value. If Joe's assumptions are right and Walmart continues to grow at 15% then the negative impact of currency can be easily mitigated by the 2% dividend yield that Walmart gives today. This dividend yield is increasing at a rapid pace and I believe there is a good potential that an investor from India can end up with more than 15% returns in the next 3 -5 years by buying Walmart. As Mohnish Pabrai says in his book "The Dhando Investor"................Heads I win; Tails I don't loose much.........

I would like to mention again that do your own homework and buy only if you are convinced. If you are not comfortable with Walmart give it a pass as more opportunities will come in future.

If you need information for researching US stocks please review my previous blog in this month. If you have any questions feel free to drop me an email at secmoney@gmail.com

Regards,

Bargain Hunter

FULL DISCLOSURE:- I have this stock in my personal portfolio before posting this blog and may also plan to buy more in future

DISCLAIMER:- Investment in equity and equity related instruments is extremely risky and there is every possibility you will loose all the money that you invest. Please consult your financial advisor before making any investment decisions.