Legendary fund manager Peter Lynch once said that you shouldn't invest in any idea you couldn't illustrate with a crayon.
Though I'm not much for crayons, I do love the pithiness of that line. We regularly preach the same idea at the Fool: Don't buy what you don't understand. And if you can't simply sketch out a company's business model -- how it actually makes money -- then maybe you shouldn't be investing in it.
Let's say you need to buy flip flops, charcoal, the latest DiCaprio epic, and shampoo all at the same time -- and want to make a questionable fashion statement while doing so -- where do you go? If you're like me, you go to Wal-Mart (NYS: WMT) .Wal-Mart sells a ton of stuff, but where does it really make its money? Let's take a look at a simple visual to help answer that question. (Note: I'm focusing on revenues here, not earnings.)
Source: Wal-Mart 2011 10-K.
Think I missed something in this illustration? Have any general thoughts on this exercise? Let me know in the comments section below. And if you haven't already, be sure to follow our Wal-Mart news and commentary using the Fool's free My Watchlist tool.
At the time thisarticle was published Fool.com graphics/photo/art editor Dari FitzGerald doesn't own shares of Wal-Mart.Motley Fool newsletter services have recommended creating a diagonal call position in Wal-Mart Stores. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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