Cott’s business was weak through the 2007-2009 recession, but has picked up since. That said, the shares have traversed a seesaw path historically. Although a recently initiated dividend leaves the shares yielding around 2.9%, investors would be better served buying industry giants PepsiCo, Inc. (NYSE:PEP) and The Coca-Cola Company (NYSE:KO). Both yield only a touch less and have much stronger businesses and brand portfolios.
A Service Issue
Another company that is heavily reliant on Wal-Mart is Moneygram International Inc (NASDAQ:MGI). Moneygram International Inc (NASDAQ:MGI) is one of the largest money transfer firms in the world. It is, however, a service provider that pretty much does only one thing. So, Wal-Mart has invited the company into its stores and could just as easily ask it to leave.
Industry giant Western Union is the obvious replacement option, but there are smaller upstarts, too, that are changing the money transfer space, like Xoom. Xoom has built on an online model which could easily, and probably more cheaply, offer the same money transfer service as Moneygram International Inc (NASDAQ:MGI) in a Wal-Mart Stores, Inc. (NYSE:WMT) store.
Wal-Mart accounted for 28% of MoneyGram’s fee revenue in 2012. That makes the company very reliant on Wal-Mart in a highly competitive industry. The money transfer company is making important changes to its business and has shifted back into growth mode after faltering badly during the recession. That makes it an interesting turnaround play, particularly as it has offices in growing markets around the world. However, investors need to carefully monitor the Wal-Mart relationship.
No Two are Alike
No two companies are alike, so just counting Wal-Mart as a big customers isn’t enough to set off alarm bells. However, the risk increases materially for companies that sell undifferentiated products or that offer only one product or service. MoneyGram and Cott investors should be paying close attention to Wal-Mart Stores, Inc. (NYSE:WMT)’s business.
The article Will Losing This Retail Giant Push Your Investments Into Bankruptcy? originally appeared on Fool.com and is written by Reuben Brewer.
Reuben Brewer has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Reuben is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.