91.08 +0.31 (+0.34%) Sell

WMT shows sign of weakness as investors do cost averaging

13 min read

WMT managed to outperform the broader market today. On a longer term basis, investors in WALMART INC. made -0.02% per day. Tuesday's performance of +0.34% was a outperformance compared to it's daily average.

[Themes containing WMT]

WMT showed a bearish trend over the last 3 months. During this period WMT delivered -4.37% and saw a maximum drawdown of -14.01%. It has been unusually choppy during this period. Long term investors are better off avoiding investing in WMT till volatility reduces and a clear trend emerges.


WMT has been underperforming the SP500 index in recent time. It showed significant outperformance (compared to the SP500 index) from 27 Jan, 2017 to 29 Jan, 2018. Over the last 2 years 11 months and 14 days, WMT outperformed the SP500 index on 51% days.

WMT returned losses on 51% days in the last three months. During this time, it delivered on average -0.06% per day. It delivered it's worst daily return of -2.98%, during this period, on Tuesday, 4 Dec, 2018. The longest stort-term trends during this period were 7 profitable and losing days. The bullish trend (which returned +5.17%) started on 1 Nov, 2018 and went on till 9 Nov, 2018 while the bearish trend (which returned -11.33%) started on 12 Nov, 2018 and went on till 20 Nov, 2018.

The last 12 months saw WMT's investors making profits in 6 months and incurring losses in 6 months. WMT was less consistent in delivering monthly returs than SP500 index. WMT was also a more risky investment than SP500 index as it's worst month in the last year, Feb 2018, returned -15.56% compared to -7.75% returned by SP500 index in Dec 2018. WMT had a shorter streak of profitable months than SP500 index. It only went up in 3 straight months during the last year. It is interesting to note that both WMT and SP500 index significantly outperform during months when quarterly/annual results are announced.

Bottoms in the investment world don't end with four-year lows; they end with 10- or 15-year lows.
-- Jim Rogers

WMT is currently seeing overall fall in volatility. In comparison, the SP500 index is seeing increase in volatility. During the last three months, there was a significant surge in WMT's volatility from 21 Sep, 2018 to 7 Dec, 2018. While there was a significant surge in the SP500 index's volatility from 19 Sep, 2018 to 29 Oct, 2018.

Advanced/professional short-term investors should note that WMT has negative skewness in it's return distribution. This indicates that investors may need to stay invested through long periods of drawdown before expecting a recovery.

Investors trading in WMT derivatives at this moment can consider 'Married Put' options strategy to receive better risk-adjusted returns.

SP500 index has more chance of extreme outcomes than WMT. Therefore, SP500 must receive a lower allocation than WMT in your portfolio. SP500 index usually has shorter drawdown period than WMT.

Based on your interest in WMT you may find it interesting to know that CSCO, PFE and MSFT are large caps that have all shown remarkable performance and qualify to be on every investor's watchlist.

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