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 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

The 10 Most Peaceful Countries in the World

5 Big Reasons Communism Failed

The 15 Most Famous Carl Icahn Quotes

10 Scary Animals that are Actually Harmless

The 8 Most Famous Singer-Actors in Entertainment

The 10 Longest Wars of All Time

The 13 Worst Looking Foods that Taste Great

The 6 Most Gruesome Injuries Suffered During a Sports Match

The 20 Biggest Contracts in MLB History

The 7 Worst Blown Calls in Sports History

7 Free Ways to Advertise Your Business Online

The 18 Best R&B Songs of the 90’s

The 10 Most Dangerous States to be a Cop

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!