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Long-term investors who seek market beating (or at least market matching returns), while minimizing risk, often resort to picking blue-chip stocks for a number of reasons.
First, as a company like Walmart Inc. (NYSE:WMT) grows larger and larger, making an investment in such a behemoth will eventually mimic the movement of the broader stock market, at least in theory.
A company like Walmart that represents such a large percentage of the American grocery business will begin to take on higher levels of correlation with the overall stock market, with investors using such companies to represent the American consumer in their directional bets of how much consumer spending will increase or decrease in a specific time frame.
In that regard, one may be reminded of recent significant volatility (risk) in the share price of Walmart in recent quarters, contradicting much of my previous argument.
The U.S. consumer has continued to increase spending as the North American economy has grown and expanded nicely recently, but shares of Walmart have fluctuated substantially, due in part to investor sentiment with respect to e-commerce and the introduction of new mega-players in a space which has been dominated by Walmart for decades.
The bottom line is: I don't believe competitors will be able to take down Walmart in the medium to long-term, due primarily to Walmart's successful integration of technology into its bricks and mortar base, making this a great long term play to pick up at discounted levels. In other words, add this company to your watch list!
Invest wisely, my friends.
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