This week’s Alpha Algorithm recommendation is a position that made an appearance in several new strategies this week. Like many other dividend-paying blue chips, Wal-Mart Stores Inc. (WMT) has outperformed the broader S&P 500 by a wide margin, making a particularly strong move to the upside in mid-May.
Founded in 1945 and headquartered in Bentonville, Arkansas, Wal-Mart Stores, Inc. operates retail stores in three segments: Walmart U.S., Walmart International and Sam’s Club. As of January 31, 2016, it operated 11,865 stores under 63 banners in 28 countries and e-commerce websites in 11 countries.
Wal-Mart versus the S&P 500 Year to Date
Seven Top Investment Strategies Betting on Wal-Mart Stores Inc. (WMT)
- Float Shrink
The company has reduced its shares outstanding over the prior 120 days while meeting criteria for shareholder friendliness, profitability measured by free cash flow and leverage ratio.
- Fundamental Strength
It is a top U.S. stock based on fundamentals measured by book value, cash flow, sales and dividends.
- Dividend Aristocrat
The stock is among those in the S&P 500 that have increased dividends for at least 25 consecutive years.
- Dividend Dog
It is one of the five highest-yielding stocks among each of the 10 sectors tracked in the S&P 500.
- High and Steady Dividend
The stock is one of 50 dividend-paying companies from the S&P 1,500 Composite Index that has increased dividends for at least 20 consecutive years.
- Small-Cap/Value Tilt
The stock was selected using a multi-factor modeling approach. It is a smaller-cap or value stock designed to enhance portfolio risk/return characteristics.
- Broker’s Best
One of Raymond James’ selection of stocks expected to outperform the S&P 500 over either a six- or 12-month period.
Buy Wal-Mart Stores Inc. (WMT) at market today. Place your initial stop at $64.50.
Since I tend only to recommend options when the stock has pulled back in the midst of an uptrend, I am holding off on recommending options this week.
With AbbVie (ABBV) pulling back and recovering slightly yesterday, I recommend that you buy the August $60 call options (ABBV160819C00060000), which last traded at $3.06 and expire on Aug. 19, to profit from this move.
Many of your other positions are currently technically oversold and due for a bounce. I would expect there to be a strong rebound once the uncertainty surrounding the United Kingdom’s vote to leave the European Union is resolved by next Friday.
Nicholas A. Vardy