So you’ve seen the headlines. There’s a global manufacturing slowdown. There’s a triple-top in the indices. Earnings were fine, but top-line revenue continues to fade. Oh yeah, and that whole European debt crisis and fiscal cliff thing in the U.S.
What’s an investor to do?
In boxing parlance, you should put your guard up before the body blow comes, but don’t forget to slip a few jabs. Because while the data indicates the market might be thumping your portfolio in the near term, you can score some hits of your own.
One way to do that is to go with discount retailer Wal-Mart (NYSE:WMT). I like the company’s prospects for the remainder of 2012 regardless of what direction the broader market takes.
In the event that the U.S. economy continues to slow, Wal-Mart’s core working-class customer base will find its budget stretched along with the rest of us. But at the same time, this will be mitigated by middle- and higher-income Americans trading down.
And if the slowdown turns out to be less bad than feared, Wal-Mart’s core customer base should be in a better position to spend. Neither case is a scenario for knock-the-ball-out-of-the-park returns, but either case bodes well for decent, steady, business-as-usual profits.
Plus, Wal-Mart is priced attractively at 13 times earnings and has a current dividend yield of 2.10%. Should we have a sharp market sell-off of 20% of more, I wouldn’t expect Wal-Mart to get hit all that hard.
And if we manage to avoid a rout, I would expect Wal-Mart to roughly match the return of the S&P 500 on the upside.
All things considered, that’s not half bad. And Wal-Mart still pays more to investors in current income than they can find in the bond market unless they’re willing to accept a maturity of 30 years.
Sounds like a winner to me. Buy Wal-Mart for the remainder of 2012 and beyond.
Charles Lewis Sizemore, CFA, is the editor of the Sizemore Investment Letter, and the chief investment officer of investments firm Sizemore Capital Management. As of this writing, he was long WMT. Sign up for a FREE copy of his new special report: “Top 3 ETFs for Dividend-Hungry Investors.”