Wal-Mart Mexico: A Target for Hedge Fund Short Sellers

Wal-Mart Stores Inc. (WMT), the global retail store behemoth which generated more than $443 B in revenues last year, is expected to come under selling pressure today. According to CNBC, this may be due to the New York Times report that came out (on Saturday) implicating Wal-Mart de Mexico in a bribery campaign in 2005 to win market dominance.

Warren Buffett


Wal-Mart Stores Inc. owns 69 percent of Wal-Mart de Mexico (WMMVY), also known as Walmex. It is due to report results on Monday and is expected to post a 14.1% increase in first-quarter profit. According to the CNBC article, Walmex could be the more attractive target for short sellers since it is this part of the business that’s directly involved in the bribery case.

Wal-Mart announced on Saturday that it was “deeply concerned” about the allegations in the Times report and had already begun investigations into its compliance with anti-bribery laws last autumn. According to the CNBC article, this investigation could cost Wal-Mart to devote millions of dollars and enormous amounts of manpower, and could eventually cost some top executives their jobs.

The CNBC article quoted private activist investor, Daniel Yu as being “more interested in shorting the Mexico traded ‘pure play’”. On the other hand, Kenneth Polcari, managing director of ICAP Equities in New York, expects only short-term pressure on Wal-Mart’s stock and doesn’t think that the bribery case will have any significant long-term effect. The CNBC article also reported that “Major institutional investors said Wal-Mart shares might face selling pressure in the near term, especially since the stock has risen about 17 percent in the past 12 months to $62.45, outperforming the S&P 500 index’s 3 percent rise”. In addition, short interest on the stock is very low. According to Date Explorers, just 0.5% of all shares are being borrowed for short sales.

News like this for Wal-Mart can open up good opportunities for both short-term and long-term investors. It can make a great short-sell play for short-term traders, but it can also be used by long-term investors to buy more shares at cheaper prices. Wal-Mart’s stock has experienced an annualized gain of 19.69% since its listing on the New York Stock Exchange in 1972 up to April 2012. That is a big figure when compared to the S&P 500’s annualized gain of 6.63% over the same period. Top hedge fund managers holding the stock include Warren Buffett of Berkshire Hathaway, Boykin Curry of Eagle Capital Management, and Ken Fisher of Fisher Asset Management.

As of this writing, Wal-Mart’s (WMT) stock price is down -4.80% from last Friday’s closing price of $62.45.

Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!