Wal-Mart May Be the One Stock You Should Buy and Hold

NEW YORK ( TheStreet) -- Wal-Mart Stores ( WMT) continues be listed on the model portfolios of most of the major brokerage firms, and there is a good reason why.

The company has had an unbroken string of revenue and earnings increases and is one of the most predictable stocks in which you can invest.

Investors appreciate that this company controls costs through thick and thin. In the past year, shares of Wal-Mart have soared 37%, while the market, as measured by the Value Line Index, is up 10%. The chart below from Barchart says it all.

Wal-Mart Stores operates stores under the Walmart and Sam's Club brands as well as the as walmart.com and samsclub.com e-commerce Web sites. Wal-Mart Stores also operates banks that focus on consumer lending.

Factors to Consider

Technical indicators provided by Barchart

A recent price weakness can signal a buying opportunity for those who have been sitting on the sidelines or want to add to their positions in stocks that are fundamentally sound.

The weak 16% Barchart technical buy signal and a Trend Spotter sell signal could be what you've been waiting for. Although the stock is trading below its 20-day moving average, it is still above its 50- and 100-day moving averages.

The stock fell 2.6% in the last month but was up 10.51% for the quarter and has increased by 36.5% in the past year. The Relative Strength Index is still above 50% at 50.63%, and Barchart computes a technical support level at $71.88. The stock recently traded at $72.62 with a 50-day moving average of $72.50

Fundamental Factors

The 20 Wall Street brokerage firms that follow the stock have assigned 29 analysts to make recommendations. They project revenue will increase again this year by a rate of 5.70% and another 5.00% next year.

Earnings are estimated to increase by 9.6% this year, an additional 8.9% next year and continue to increase annually by 8.4% for at least five years.

The price-to-earnings ratio of 15.4 is marginally higher than the market P/E ratio of 15.0. The dividend of 2.20%, which is about one-third of estimated earnings, is right near the market dividend rate of 2.3%. The balance sheet is solid and receives an A++ financial strength rating. Wal-Mart continues to control costs and growth and looks to keep on track building new and smaller Wal-Mart Expresses.

Investor Interests

The Wall Street analysts are keeping this stock on their model portfolios and have made seven strong buy, four buy, 17 hold and only a single underperform recommendation to clients.

I use the readers of Motley Fool to gauge the individual investor sentiment, and the 7,034 reader giving an opinion voted 89% that the stock will beat the market.

Short-selling on the stock is getting weaker and has dropped from about 24 million shares at the beginning of the year to around 22 million share recently. TheStreet rates the stock A+.

Peer Comparison

During the last 12 months, while Wal-Mart's share price grew 37%, Target ( TGT) was up 25%, Costco ( COST) was up 23% and Dollar General ( DG) was up 37%.

Recently, both WMT and DG have experienced a little price weakness.

Target: Rated A by TheStreet. Analysts think revenue will increase by 4.8% this year and 5.5% next year, and that earnings will increase by 12.1% next year and 12.13% annually for the next five years.

Costco: Rated A+ by TheStreet. Revenue is projected to be up 10.6% this year followed by another 6.1% next year, and earnings are estimated to be up 14.5% next year and average annual increases of 12.84% over the next five years.

Dollar General: Rated B+ by TheStreet. Revenue is expected to be up 9.0% this year, another 9.5% next year with earnings up 17.8% next year and earnings growth to continue at an annual rate of 18.08% for at least five years.

Conclusion

Wal-Mart is a growth stock that pays dividends. The steady increases in revenue, earnings and dividends makes it an exception to the never buy and hold rule. The best place for this stock is in an IRA on a dividend reinvestment program. I can't say that the stock has had a pullback. I'd say it's just had some weakness. The moving averages and turtle channels confirm that in the long term, the stock increases in price:

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