Is it time to sell America’s largest retailer?

From Steve Sjuggerud, Editor, True Wealth Systems:

Walmart just finished its best year since 1999…

The company soared 47% in 2017. And it continued that trend in January, jumping another 11%. Then the stock came back to earth.

Walmart wiped out four months of gains in February, falling 16% in total. And not surprising, a 16% one-month loss is a rare extreme for the country’s largest retailer.

In fact, falls like this have only happened four other times since 1980… And history says this could be reason for Walmart investors to sell.

Let us explain…

We last wrote about Walmart on October 25. And back then, we told you about a major opportunity in the company…

Walmart had spiked 9.5% in a week. And that meant 26% upside was possible, based on history.

History turned out to be right… as Walmart rallied 25% through its January peak.

But again, things have reversed since then.

The stock wiped out more than half of those gains in one month. Take a look…

This is an ugly chart… Unlike the overall market, Walmart’s shares haven’t recovered since the correction. Instead, they’ve continued to hit new lows.

But while the chart is ugly, history says it could get uglier.

You see, after previous 15%-plus one-month falls, Walmart has dramatically underperformed over the next year. Take a look…

Walmart has been a home-run investment since 1980, returning roughly 19% a year. But buying after the company has fallen 15%-plus in a month greatly diminishes those returns.

Specifically, similar extremes have led to a 4% loss in one month… a 0% return in three months… and just a 6% return over the next year.

That’s still a positive return. But it’s much worse than you’d typically do in Walmart shares. And simply owning the S&P 500 Index would have doubled this annual return over the same period.

Remember, this extreme has only happened four times since 1980… so our sample size is small. But all four instances led to less-than-stellar returns going forward.

Buying after today’s extreme is a bad idea. And if you’re a Walmart shareholder, history says the next year or so may be rough.

Good investing,

Steve Sjuggerud and Brett Eversole

Crux note: Steve and Brett always have an exit plan…

In fact, their True Wealth Systems computers recently issued five “sell” signals to subscribers. They closed out for an average gain of 25% in just 11 months. 

Right now, Steve’s looking for new opportunities as the “Melt Up” approaches… when a huge run-up in stocks will offer triple-digit gains before the bull market ends.

To access his research, sign up for a risk-free trial subscription right here.

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