75% of analysts think the Wesfarmers Ltd (ASX: WES) share price will not outperform the market.
Who is Wesfarmers?
Wesfarmers is the name behind some of Australia's biggest and best companies. For example, it owns Coles, one of Australia's best supermarkets. Some would say it's the best supermarket.
It also owns Bunnings Warehouse, our country's leading DIY home improvement chain. This business is also rolling out across the UK.
Also, Wesfarmers is the name behind Kmart, Target and Officeworks. Finally, it has an industrials business — including coal mines. It hopes to sell Officeworks and its coal assets soon.
Wesfarmers, a bad idea?
Out of the 16 analysts surveyed by The Wall Street Journal, 12 analysts (75%) rate Wesfarmers shares as a 'hold' or lower. Just four analysts have a buy on the company's shares, down from five analysts a month ago.
However, it's worth noting that many of these analysts are paid to research companies and identify the shares that they expect to outperform the market, or S&P/ASX 200 (Index: ^AXJO) (ASX: XJO), over the next 12 months.
It's not an easy thing to do. In fact, some people (myself included) would say that picking shares in the short-term is not a good way to invest.
Indeed, by focusing their attention on such a short period, and setting 'price targets' to match, many analysts overlook one very important fact of the sharemarket. It came from an investor who did his best work many decades ago and was the mentor of Warren Buffett, the world's second-richest person.
Benjamin Graham famously said, "In the short run, the market is a voting machine but in the long run, it is a weighing machine."
What he meant was, only by investing for the long-term can you unlock the real value of companies. In the short-term, share prices bounce around all over the place because people are irrational, driven towards terrible investment decisions out of fear and greed.
Wesfarmers: buy, hold or sell
In my opinion, Wesfarmers is one of the best blue chip shares on the ASX, sitting alongside the likes of Commonwealth Bank of Australia (ASX: CBA) and Telstra Corporation Ltd (ASX: TLS). However, I agree with some analysts who believe its shares are expensive.
But rather than sell out, I think Wesfarmers is closest to a hold. It could outperform in the next 12 months, it could fall, or it could return the same as the ASX 200 — I really don't know.
What's important to me is the long-term gains, with dividends while I wait.
