Why these analysts are bullish about the Wesfarmers (ASX:WES) share price for the long term

Fund managers and analysts break down what stock they’d own if markets were closed for the next five years

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The defensive nature of the Wesfarmers Ltd (ASX: WES) share price has been paying dividends in the past week. It’s up around 2% over that time and has risen by 0.86% today to close at $57.39.

Many investors might consider this a win given the sharp pullback for the broader S&P/ASX 200 Index (ASX: XJO), which is down north of 2% over the same time period.

Looking back at reporting season, the Wesfarmers share price has tumbled 10% since the release of its FY21 results on 27 August.

Despite delivering solid growth in FY21, the company flagged that “earnings in the group’s retail businesses during the first half of the 2022 financial year may be below the prior corresponding period”.

It looks like the post-earnings selling has subsided, with the Wesfarmers share price bouncing off the $56 level.

In an article featured on Livewire, fund managers and analysts were asked which stocks they would pick if the markets were going to close for the next five years.

Portfolio managers at Airlie Funds Management, Emma Fisher and John Sevior, pointed to Wesfarmers.

What’s so good about the Wesfarmers share price in the long term?

In a world where the markets are closed for the next five years, Fisher pointed out that “you need to own a business that needs zero access to capital… You need a really high returning business that’s got a fantastic balance sheet, generates a lot of cash, but doesn’t need much cash”.

She said Wesfarmers ticks the boxes as a “very well-capitalised business and is a huge play on Bunnings (70% of earnings)”.

“The hardware business’ relative market share is 5 to 6 times higher than Mitre10, and well-capitalised competitors such as Woolworths have tried and failed to compete in the space,” she said.

“It is rare to find a retailer of that size that makes people excited about their business – not to mention a hardware retailer of all things.”

Sevior has also been impressed by the Wesfarmers business. He highlighted the “durability of the business, the quality of balance sheet, the quality of management, and the history of capital allocation”.

After all, the Wesfarmers share price has steadily climbed 81% in the last five years, excluding dividends.

Should you invest $1,000 in Wesfarmers right now?

Before you consider Wesfarmers, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Wesfarmers wasn't one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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