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Is the Wesfarmers Ltd (ASX:WES) share price a buy after yesterday?

The Wesfarmers Ltd (ASX: WES) share price finished at a high of $46.48 yesterday after it rose by 1.77%.

Wesfarmers gave a strategy briefing day presentation yesterday, which outlined how the company is going and its future. Some market commentators believe that Wesfarmers needs to make a large acquisition to get back to growth.

But, straight after ending its UK Bunnings & Ireland Bunnings plan, CEO Rob Scott wasn’t in a hurry to jump in.

In the past Wesfarmers has done best at acquiring an underperforming business at a good price and then turning it around into a high-performing one. Bunnings and Coles are two excellent examples of Wesfarmers getting the best out of business.

Mr Scott went to some effort to say that the current group of businesses, after the Coles divestment, still has a good growth runway.

Indeed, Bunnings is still growing at double digits. But I have question marks about the long-term viability of some of the bricks and mortar businesses like Officeworks and Target.

If Wesfarmers is going to continue to be a high-performing business for shareholders it will need to expand into other areas beyond retail, or at least be one of the best online retailers in the country. Amazon and Kogan.Com Ltd (ASX: KGN) both have cheaper operating business models, in time they can offer lower prices.

I like that Scott said Wesfarmers had suffered from short-termism in recent times. It needs to make the best long-term decisions.

The market’s obsession with the next result can be detrimental. For example, a business could cut its marketing budget and magically generate a higher profit. Of course, cutting your advertising is a bad move for the long-term.

Foolish takeaway

Wesfarmers is currently trading at 18x FY19’s estimated earnings and it comes with a handy grossed-up dividend yield of 6.85%. I certainly prefer Wesfarmers to the big banks as an investment idea, but I don’t think it’s going to be a clear market-beater over a three to five year timeframe.

Shares that I do think have a good chance of beating the market are these exciting businesses.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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