Managing Your Highly Appreciated Walmart Stock
For Walmart and Sam's Club executives, Walmart stock is a significant portion of your wealth.
Even for those who prioritize diversification by liquidating RSUs and PSUs on the vesting date, your human capital wealth will still swing significantly with the stock price due to future grants, performance-based pay and the impact of the share price on your career opportunities within the Company. See below for the four types of Company stock exposure that executives typically have.
With the Walmart stock price up 65% and 110% over the last 1 and 3 years, respectively (as of 2/27/25), Walmart's equity compensation plans have created a lot of wealth for its executives. However, increased wealth often brings added complexity. In this case, the investment risk associated with highly concentrated single-stock positions and the cost of tax liabilities need careful consideration.
With the trading window currently open and more shares vesting in March, let's review the 3 options you have to manage your highly appreciated Walmart stock.
These options are not mutually exclusive, and the best strategy is often a combination. Taurus Financial Planning helps clients assess the benefits and costs of diversification to make the best decision for their unique situation. To learn more about working with TFP, schedule a time below.
#1 Do Nothing and Grow Your Walmart Position
The path of least resistance is to continue holding your Walmart shares and allow your position to grow as you receive more shares in your Fidelity account from vesting RSUs and PSUs.
The benefit of this strategy is that by not selling, you continue deferring capital gains tax on the appreciated shares. While you'll pay the tax eventually, the value in deferring is that you have the potential to earn an investment return on that tax liability which is forfeited if you liquidate and pay that tax liability today.
The disadvantage, however, is that you may end up with an overconcentrated position in a single stock. This is the classic “don’t put all your eggs in one basket” perspective.
Yes, Walmart is a successful company with strong recent stock performance, but a diversified portfolio with hundreds of stocks helps to limit single-stock, company-specific risk and exposes you to other sectors of the economy.
#2 Sell Your Walmart Shares and Diversify
The textbook approach to managing company stock is to sell and reinvest the proceeds in a diversified portfolio of securities across various sectors and countries.
However, if you have significant capital gains, selling all your Walmart shares at once may not be the best option. The benefits of the diversified portfolio must compensate for the forgone expected return on the deferred capital gains tax. Fortunately, the decision is not binary - it is not a sell all, or sell none decision.
By selectively selling WMT shares with the lowest embedded tax liability - those shares with a High-Cost Basis and Long-Term Holding status - it is possible to gradually reduce the concentrated position while continuing to defer a significant portion of the tax cost.
Holding a concentrated position in a stable company like Walmart can be fine, but it's essential to limit the potential impact of a single stock's performance on your quality of life and financial goals.
Tip: The Fidelity Statement shows the aggregate cost basis for a single stock position, but you'll need to login to Fidelity to view the cost basis for each tax lot and identify which tax lots are the most efficient to sell.
#3 Give Away Your Walmart Shares - Charity and Legacy
Charity: Many charities accept stock donations. If charitable giving is part of your financial plan, donating highly appreciated stock is a tax-efficient way to give.
The charity receives the full market value of the shares, and you can deduct this amount on your tax return. In contrast, if you sold the shares and donated the cash, you would have to pay capital gains tax, leaving less resources for the charity and a higher tax bill.
Tip: A Donor Advised Fund (DAF) allows donors to deduct several years of donations in a single tax year. This is beneficial for those in a high tax bracket with a large amount of highly appreciated stock.
Legacy: Another option is to hold the shares with the intention of passing them on to your heirs as part of your legacy. When the shares are passed to heirs, the cost basis is adjusted to the current market value (i.e. step-up in basis), eliminating any previous unrealized capital gains tax.
Looking Ahead
The risk of an over-concentrated stock position is often underestimated until that risk materializes. Recently, I've received more questions about why the stock price fell 6% after Q4 earnings than about why it has increased over 65% in the past year. While these are interesting questions, it’s ultimately more important to focus on a stock's future growth prospects and valuation in relation to the broader opportunity set in order to make a prudent decision today.
Managing company stock is a crucial aspect of any executive’s financial plan and investment strategy. It requires balancing investment risk, taxes, and executing trades with the right tax lots while ensuring compliance with minimum holding requirements.
If you have any questions on managing a concentrated stock position or want to learn more about working with Taurus Financial Planning, schedule a time to meet below.
Below are a few deeper dives into the topics discussed in the article:
Thanks for reading,
Mark Chisenhall, CFA, MBA
Financial Advisor | Founder of Taurus Financial Planning
Taurus Financial Planning is a Fee-Only Wealth Management firm based in Bentonville, AR. The firm offers comprehensive financial planning, tax planning and investment management to corporate executives across the country.
Taurus Financial Planning is a Registered Investment Advisor with the State of Arkansas. This information is provided as a guide to assist you in your financial planning. The specific examples are provided for illustration purposes only and are not representative of specific investments or guarantees of future returns. Please consult with a professional for specific questions regarding your particular situation. If there is any error or inconsistency between this document and the official company plan documents, your company plan documents will govern.
This publication is for informational purposes only and is not intended as tax, accounting or legal advice or as an offer or solicitation of an offer to buy or sell or as an endorsement of any company security fund or other securities or non securities offering. This publication should not be relied upon as the sole factor in an investment making decision. Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any recommendations made by the Author, in the future, will be profitable or equal the performance noted in this publication.