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TheStreet Open House

Bite Into Wal-Mart if the Stock Falls in Wake of China Meat Recall

Stocks in this article: WMTCAT

NEW YORK (TheStreet) -- Wal-Mart (WMT) is having to recall "Five Spice" donkey meat from stores in China after fox meat was found in the packages. The provincial government in China has ordered a halt to the sales of donkey meat by the supplier, Dezhou Fujude Food Group, according to an article in Bloomberg Businessweek.

If Wal-Mart shares fall on the news, investors should look upon this as an opportunity to buy the stock at a discount for the long term.

After all, investors were rewarded for picking up shares when Wal-Mart's Mexican bribery scandal surfaced in April 2012. At that time, Wal-Mart shares were trading for less than $60 a share. Now they're changing hands for about $78.90.

Warren Buffett bought more than 7.6 million shares of Wal-Mart at $61 in the first quarter of 2012. At present, Berkshire Hathaway (BRK.A) owns close to 50 million shares of Wal-Mart, its seventh largest holding.

When scandals hit that do not affect the core operations of a company, they can present an excellent opportunity to accumulate shares.

A recent series of articles on TheStreet, "Least Favored in 2013," discussed companies that had been affected by "shockers" in 2013. These included Caterpillar (CAT), the biggest heavy equipment maker in the world and a member of the Dow Jones Industrial Average. As I wrote in an article for that series, Caterpillar lost a great deal of money because of its purchase of a Chinese company that had fraudulent accounting.

But Caterpillar recovered from that scandal and is up more than 11% in the last six months.

The same should be expected of Wal-Mart if the stock price falls due to the donkey meat scandal.

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