Walmart is one of the major retailers with an enviable logistics system that keeps prices low for consumers. While its tactics have been the target of various criticisms, there’s no denying that Walmart has been successful.
The company’s revenue continues to grow, but it’s not growing as fast as it once did with annual sales of more than $5 trillion. Still, the company generates billions of dollars in profits and remains a retail giant.
If you’re considering buying stock at Walmart, here’s how to do it and what you need to know before you decide.
1. Analyze Walmart and its financials
Analyzing a company’s competitive position and financial health can be the hardest part of buying stocks, but it’s also the most important. The best place to start is the company’s Form 10-K, which is the annual report that all public companies must file with the SEC.
The 10-K can help you learn a lot about the company:
- How does it make money and how much
- Its assets and liabilities
- Its profitability develops over time
- Competitive Landscape
- Various risks faced by the company
- Managing teams and how to motivate them
An annual report is a good first step to learning more about a company, but you want to do more than that. You should check what other companies are doing to compete as it is important to have a broader view of the industry.
For example, Walmart competes in one of the toughest categories: consumer retail. It faces competition from more general retailers like Target and Costco, as well as traditional grocers like Kroger, Safeway and Publix. There are also new competitors like Amazon, eBay and many other online retailers that offer generic and niche products that don’t fit Walmart’s high-volume business model. But Walmart has also pushed hard with its own online initiatives.
2. Does Walmart make sense in your portfolio?
Overall, Walmart is a solid choice, one of 30 companies in the Dow Jones Industrial Average, making it one of the most owned companies in the world. But investors looking for more growth or less challenging sectors need to ask themselves whether the Bentonville giant is a good fit for their portfolio. Still, Walmart has shown enough resilience in the face of competition, paying a nearly 50-year streak of dividend increases and attracting investors who want regular cash payments.
So you should ask yourself the following questions:
- Do you understand the business and its future prospects?
- Can you continue to analyze it as your business and industry evolves?
- Given how volatile stocks can be, can you hold or even buy more when they fall?
- Do you understand the value of the company and how it compares to the current market value?
3. How much investment you can afford
How much you can afford to invest has less to do with Walmart and more to do with your personal financial situation. Stocks can be volatile. So to give your investment time to pay off, you should be able to keep your money in stocks for at least three to five years. This means you should be able to live without money for at least that long.
Commitment to holding the stock for three to five years is important. You hate having to sell a stock when it’s nearing a bottom, only to see it bounce higher after you exit your position. By sticking to a long-term plan, you can ride out the ups and downs of stocks.
If you invest in individual stocks, you should probably keep the percentage of each individual position between 3% and 5%. That way, you’re not seriously exposed to investments that destroy your portfolio. If the stock has a higher business risk, you can choose a lower percentage than this range.
Also, don’t just invest a lump sum of money in stocks, but consider how you can add money to the position over time.
4. Open a brokerage account
While opening a brokerage account may sound difficult, it is actually quite simple and you can have it all set up in about 15 minutes.
You should choose a broker that suits your needs. Do you trade often or rarely? Do you need a high level of service or research? Is cost the most important factor for you? If you buy a small amount of stocks but invest primarily in funds, some brokers offer commission-free trading exclusively for those funds.
After opening an account, you need enough funds to buy Walmart stock. But you can do this completely online, and it’s easy.
With Walmart stock trading around $120 per share in May 2022, you probably won’t have enough money to buy an entire share. Several brokers, including Charles Schwab and Fidelity, have started offering fractional shares to help with this, allowing you to invest for just a few dollars.
5. Buy Walmart stock
Once you’ve decided to buy Walmart stock and open and fund your brokerage account, you can set up your order. When entering your order, use the company symbol – WMT.
Most brokers have a “trade ticket” at the bottom of every page so you can enter your order. On the broker’s order, you enter the ticker and the number of shares you can afford, or if you buy fractional shares, the amount you want to invest. Then enter the order type: market or limit. A market order buys a stock regardless of the current price, while a limit order is only executed when the stock reaches the price you set.
If you’re only buying a few stocks, it’s best to stick to market orders. Even if you pay more for a market order now, if the stock continues to perform well, it won’t have much of an impact on long-term performance.
Buying stocks can be exciting, but success doesn’t happen overnight. Investors should take a long-term view of their investments, and if they believe in the stock for the long-term, they should consider using dollar average cost.
In dollar average cost, investors add a certain amount of money to their positions over time, which can be really helpful when stocks fall and allow them to buy more. High-flying stocks can fall from time to time, so this strategy can help you get lower purchase prices and higher overall profits.
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