Walmart

Next on the block for stocks I'm planning to hold for the long-haul, Walmart (WMT).

Reasons to hold

It's best in show by pretty much every measure vs it's competitors (Costco and Target). It pays a higher dividend (2.5%), it grows that dividend at a higher rate, has better margins, and has a better return on equity.

It operates at a scale that is incomprehensible for many, and it does it with extreme efficiency. Anybody working in the Bay Area has likely been approached by one of their internal recruiters or seen them canvassing for applicants at various hangouts in SF. I've no idea what they're up to with WalmartLabs, but they're bringing their A-game to technical recruiting and that should make all of their competitors scared. In isolation that's probably not a reason to buy, but combined with everything else it definitely fills me with confidence in the company.

The trade

As with the previous JNJ trade, I don't have the free cash available to buy in today. I want to make sure I don't miss the ride, and I'm willing to pay a premium now to lock it in. As a result I bought 1 call option expiring the 21st of December 2013 at a strike of $77.50 for $2.61. Total cost was $261 (1 option contract x 100 shares x $2.61 premium).

Much like that previous trade, I also took this out a month or two ago when WMT was trading higher, so the same trade today could be taken for a total of $76.

Come December, if WMT is trading above $77.50 I'll exercise my option and buy 100 shares for $77.50. If it's below that, I'll let the option expire and just pay the cheaper market price.

Published on in Trades