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Contra Goldman, Wal-Mart called worst stock of 2008

Wal-Mart, which was called a stock to hold onto this morning by Goldman Sachs, also made another list. Try this one on for size: The Motley Fool called Wal-Mart the worst stock to own in 2008. Wow -- those are two different viewpoints!

Wal-Mart shares are pretty much where they were in 1999 -- in the $45 to $50 range. Does that mean it's the worst stock to own in 2008? For Wal-Mart to grow revenues in the double digits, the figure must be in the tens of billions of dollars. Based on its sheer revenue size alone, Wal-Mart should be growing in the low single digits, right? Does the market recognize this when pitting it against retailer competitors who have higher growth rates? I suspect that it does not.

In its analysis, the Fool looked at statistics like revenue per employee, quarterly revenue growth and P/E ratio between Wal-Mart, Target Corp. (NYSE: TGT) and Costco Wholesale (NYSE: COST) and found Wal-Mart's numbers weren't the most impressive of the bunch. Hence, it's the worst stock to own in 2008. So, although a probable recession may cause more customers to enter Wal-Mart stores, as Goldman argues, the cost of Chinese-made products (a mainstay in Wal-Mart stores) may rise and cause the company to experience margin shortfalls or actually raise customer prices (something I've referred to in the past).

Will Wal-Mart stock rise or fall in 2008? You make the call. If it ends up at $47.23 (where it is this morning) a year from now, you can always stuff that cash under a mattress in 2009 to get the same return.

Sunday Funnies: Motley Fools vs. TheStreet.com

Many of you, like me, are probably reading the Motley Fools or TheStreet.com's Internet investment pages from time to time when you are not totally engulfed in Bloggingstocks.com's deeply informative blogs.

Just about everything you read these days is way over hyped including our own pages. During the Internet bubble days when everyone talked about eyeballs you almost expected to see promotional posters of a giant eyeball cloaked in the red, white, and blue, top hat and all, staring you down, over the direct plea caption "We want you!"

TheStreet.com heralded by none other than James 'Mad Money' Cramer has survived the dot-bomb era of recent past to become one of the good stock reads on the Web. Recently though I have noticed it has become less interesting, and made more difficult to read.

I must assume that in an effort to increase revenue from advertising because of its poor subscription base TheStreet.com has stretched one page stories to four and five pages. You must click on never ending 'continued' prompts at the bottom of the page. This has allowed it to increase the number of advertisements by up to 500%. It has become so obnoxious that I refrain from the torment and simply go elsewhere on many occasions.

Continue reading Sunday Funnies: Motley Fools vs. TheStreet.com

Fools bet on Chesapeake Energy

A recent article by The Motley Fool argued that Chesapeake Energy Corp. (NYSE: CHK) was a much better investment than Citigroup Inc. (NYSE:C). According to Philip Durell's analysis, Chesapeake Energy is one of the country's largest independent oil and gas companies. 92% of the company's assets are in natural gas. Chesapeake Energy has spent $14 million purchasing land on which to ramp up its drilling program. The company currently has proven reserves of 9 trillion cubic feet equivalent in natural gas, enough to last 15 years at current usage levels. Additionally, probable reserves amount to another almost 18 trillion cubic feet equivalent.

The Fool likes Chesapeake Energy for a number of reasons. Natural gas prices do not fluctuate wildly. Gas futures on the NYMEX run between $6.90-$9.20 per million cubic feet equivalent depending how far out the delivery date would be. This is a very profitable price range for Chesapeake Energy, which owns and leases more than half of its 135 drilling platforms. Due to its land purchase program, Chesapeake Energy is able to concentrate drilling platforms, thus reducing operating costs. The company also has experience in various forms of gas drilling and exploration.

Durrell thinks the stock is currently undervalued, trading at 60 cents on the dollar, making it a much better investment option than Citigroup.

Whole Foods, poised for better things

organic gala applesWhole Foods Market, Inc. (NASDAQ:WFMI) was reinstated as outperform on 11-10-06. This stock is very attractive to me based on the things I've read about it. If the analyst's assertions are true, and WFMI's stock lost value based on a simple change in management focus from business operations to maintaining share price, then what should be happening in timely fashion will be a moderated climb back up to WFMI's fair market value. Salim Haji, an excellent writer over at The Motley Fool, offers the opinion that this stock has an intrinsic value in the $50 to $60 range.

With additional consideration of the fact that WFMI is undertaking a strategic stock buy back program, if I was looking for some fun places to play with some funds, this would be one of them. It is my opinion that this stock deserves some close attention right now. I think it is headed back up. One other thing I take into consideration about this situation is the possibility that Wal-Mart is going to fall flat on its corporate face with its "organic" food roll out. If that happens, (and I think it will), then Whole Foods Market will add even a bit more sparkle to my eye!

You can learn more about organic foods at About Organics.

Symbol Lookup
IndexesChangePrice
DJIA-74.9212,454.83
NASDAQ-1.852,837.53
S&P 500-2.861,317.82

Last updated: May 28, 2012: 09:14 PM

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