TOD WMT * Valuation * Tariffs * Hedge?
Gimmick account for reasons
My friend has received a large gift in the form of > 4000 TOD Walmart shares. "Transfer On Death". The gift giver is a terminally ill elderly person with days to months left. This is a significant gift for my friend.
1. Neither of us is familiar with WMT as a stock and its valuation. It looks like WMT has nearly doubled in the last year. Can anyone here help with reasons for the doubling of the stock price?
2. Can anyone here help with an outlook for the stock over the next 6 months to 1 year timeline.
3. How do possible upcoming tariffs affect price? Baked in already?
4. Should my friend hedge? If so, recommendations on how?
5. Any additional advice for dealing with the TOD aspect of this?
Thank you in advance for any input and guidance.
5 Replies
1. Huge megacap. I doubt anyone here, or anyone you will ever talk to, has an edge in trading this stock.
2. Probably inline with the greater market, but obviously way more variance because it's a single stock.
3. Baked in.
4. You don't have a whole lot of options. The only real option is to buy... options. In this case, some put options. I assume you don't know how to do this because you're asking such basic questions. I won't explain how to do it because you probably don't even have the permissions at your brokerage, and the risk of you screwing it up may outweigh the benefit of the hedging.
5. I guess take a little risk off in the rest of your portfolio to compensate for the new overweighting of risk that this huge single-stock position introduces. I assume the cost basis will be established as soon as you take ownership, so there shouldn't be tax consequences if you sell it as soon as you're able to. Then you can immediately take the proceeds and allocate it in your portfolio as you would cash.
Does he plan to sell once transfered?
In any event I would probably do some sort of low priced hedge spread (ie wide put butterfly or maybe some sort of put calendar) . Or not? I would look at any kind of downside hedge as more of a free shot on free money.
Their plan is to sell and buy a house. I believe the concern is how much of a run up the stock has had over the last year coupled with not knowing when the stock can be sold. If the stock were to take a steep nosedive between now and whenever it can be sold it would put them out of range for buying a house.
Might be worth asking these questions in the stickied thread in this forum: https://forumserver.twoplustwo.com/30/bu...
I would say need more info about the friend
Is that money going to be a down payment or are they buying a house all in cash?
Also, if they're older, then buying a house makes more sense. But if this friend is in their 20s or 30s, then it might actually be a better idea to just continue to rent and put the entire thing in the market. The longer the term, the better. Compounding ftw
Most likely need to talk to an advisor or two familiar estate planning and tax implications. Lotta moving parts in the situation described and it's ambiguous with info posted
37x P/E seems steep for Walmart but we are living in a new paradigm where stocks only go up. It’s not Tesla though - it’s not going to drop 50% in a matter of months.
