Dykstra: Shopping for Wal-Mart Options

Many analysts predict a recession in the coming year, and although this could have major consequences for the stock market, there are still solid stock picks out there.

One company that I believe possesses the resources to prosper even if the economy struggles is Wal-Mart(WMT). The retail giant has perfected the low-cost, discount-sales model, and it beats out local and national competition by charging the lowest prices and spending the least amount of money. And through its heft, the company benefits from huge economies of scale.

I wrote about Wal-Mart back in early July, and my reasoning back then applies now. In early September, Wal-Mart reported that same-store sales increased 3.1%.

This metric represents one of the key indicators for retail sellers, and it tells me that people continue to spend money at Wal-Mart in spite of the housing slump.

Furthermore, Wal-Mart's $3.66 billion in free cash flow will allow it to pursue a lucrative expansion in its existing businesses. The company shares some of that cash wealth with its shareholders in the form of a 2% dividend yield, which will attract shareholders in all market conditions.

With that in mind, I will place a limit order to buy 10 March 37.50 calls (WMTCU) for $6.70, or better. The stock closed trading Tuesday at $43.16.

Now, as I do every Wednesday, it's time to go to the videotape. After all, at the end of the day, it's all about results. It doesn't matter if you pick stocks or make cell phones -- if you want to play in this league, one must deliver. There are winning players and losing players, and nothing in between.

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