Wal-Mart Looks Attractive (WMT)

Shares of Wal-Mart WMT are now trading below the $50 level. The stock has undergone a fairly significant correction recently, and is starting to look more and more like a bargain. Year-to-date, WMT has fallen 7.08% compared to a decline of 3.18% for the SPDR S&P 500 ETF SPY. Look for this relationship to reverse itself in the second half of 2010. Wal-Mart (WMT) is now trading at a trailing P/E of around 13, a forward P/E of 11.28 and a PEG ratio of 1.17. Concerns over the state of the economic recovery and the possibility of a double dip recession may continue to weigh on the broader stock market going forward, but it is hard to envision a scenario that would add considerable downside risk to Wal-Mart (WMT) shares. If the economy is indeed slowing down, it may benefit the world's largest retailer as consumers trade down from higher end stores. Investors may also be inclined to move money into higher quality, larger market cap, dividend paying stocks. Wal-Mart is one of the world's largest companies with a market cap of $184 billion and also provides a dividend yield of 2.44% at current levels. Furthermore, WMT has a beta of just 0.24, which suggests that the stock is less sensitive to moves in the broader market. If you are conservative, or even bearish, given current market conditions, high quality defensive stocks that pay a dividend should be bought and higher beta names should be sold. The Street has a median price target of $62.00 on the shares, implying significant upside from current levels. The high target price is $70.00. The risk/reward in this stock is becoming more and more skewed to the long side everyday, because of its limited risk profile and appreciation potential. In a tough market, look to WMT to preserve capital and offer upside going forward.