Don't Bet on Walgreens Boots Alliance Stock in June

Walgreens Boots Alliance (WBA) is historically the worst-performing S&P 500 stock in June, averaging a 3.7% loss and finishing lower 80% of the time over the past decade, according to Schaeffer's Quantitative Analysis. Despite muted price action following news of a potential Sycamore Partners deal, analysts remain largely neutral on the stock with a preponderance of "hold" ratings, while options data indicates high call volume relative to puts and low volatility expectations, creating potential headwinds.

Analysis

Walgreens Boots Alliance (WBA) exhibits a significant historical underperformance in June, identified as the worst-performing stock on the S&P 500 for the month over the past decade, with an average loss of 3.7% and negative returns in 80% of instances. This historical trend presents a notable headwind, despite the stock's recent muted price action around $11.21, which followed news of a potential $10 billion privatization deal by Sycamore Partners. Current analyst sentiment is predominantly neutral, with 11 out of 15 analysts rating WBA as a "hold," suggesting potential for downgrades to act as further pressure. Options market activity indicates a high 10-day call/put volume ratio of 4.57, ranking in the 84th percentile of its annual range, which could signify an unwinding of bullish sentiment if this optimism fades. Concurrently, WBA's Schaeffer's Volatility Index (SVI) of 23% is in the low 12th percentile of its annual range, indicating low implied volatility expectations from options traders. However, its Schaeffer's Volatility Scorecard (SVS) of 81 out of 100 suggests WBA has historically exceeded these low volatility expectations, implying that actual price swings could be greater than currently priced by the options market.

Key Decisions for Investors

• Investors should exercise caution regarding WBA positions in June, given its strong historical underperformance during this month and the potential for analyst downgrades.
• Consider monitoring the high call/put ratio for signs of unwinding optimism, which could precede further price declines.
• Given the low SVI but high SVS, options strategies that benefit from an underpricing of potential volatility might be considered, particularly if anticipating a move beyond current market expectations, while also keeping an eye on developments related to the Sycamore Partners deal.