Have you ever held onto a winning investment for so long that letting go, even partially, feels almost painful? That’s the kind of dilemma some seasoned investors are facing right now with one of America’s favorite retail giants.
It’s a stock that’s delivered incredible returns over the years, turning early buyers into very happy campers. But lately, things have shifted. The shares aren’t soaring like they used to, and there are some underlying concerns that just won’t go away. In a bold move, one well-known investment group has decided it’s time to take significant profits off the table—while still keeping some skin in the game.
Trimming a Winner: Locking in Massive Gains
Shortly after markets open on a typical trading day, the decision goes live: sell half the position. For this particular portfolio, that means offloading shares bought back in early 2020, right around the time when everything felt uncertain. The result? A whopping 200% gain realized on those shares. Not too shabby, right?
In my view, there’s something almost poetic about it. You ride the wave up, enjoy the ride, and then—when the momentum starts to fade—you secure those hard-earned profits. It’s not about abandoning ship entirely; it’s about smart allocation. After the sale, the remaining holding drops to under 1% of the portfolio. Light enough to reduce risk, but still there if things turn around.
Of course, this isn’t a knee-jerk reaction. It’s based on careful observation of recent performance and forward-looking concerns. Let’s dig into what prompted this move.
The Core Issue: Slowing Membership Momentum
At the heart of this retail powerhouse’s success has always been its membership model. People pay an annual fee for the privilege of shopping there, and in return, they get access to bulk deals that feel like stealing—legally, of course. Historically, members have been incredibly loyal. Renewal rates hovered in the low 90s percent range, which is phenomenal for any subscription-based business.
But something changed over the past year. Those renewal numbers started slipping. Globally, they’ve dipped to around 89.7%, down from over 90%. In the key U.S. and Canada markets, it’s gone from 92.8% to 92.2%. Not a catastrophic drop, mind you, but noticeable—and persistent.
What’s driving this? Management has pointed to higher churn among online shoppers. Perhaps the convenience factor isn’t quite as sticky digitally, or maybe economic pressures are finally nudging some members to reconsider even their “must-have” subscriptions. Whatever the reason, leadership has been candid: they expect this trend to continue for a few more quarters.
Renewal rates remain very high overall, with no signs of a fundamental breakdown in the business model.
That’s the reassuring part. The business itself is still rock-solid—huge sales volumes, efficient operations, loyal core customers. Yet the stock market doesn’t always reward solidity alone. It craves growth, especially consistent, accelerating growth.
Why the Valuation Feels Stretched Now
Here’s where things get interesting. This company earns the bulk of its profits not from selling groceries or electronics, but from those membership fees. They’re high-margin, predictable, and recur year after year. When renewal rates were rock-steady and new memberships pouring in, investors were happy to pay a premium valuation—often north of 40 times forward earnings.
Today, that multiple sits around 44x. Impressive for a retailer, sure. But with even modest softness in membership trends, the growth story starts to wobble. If paid member growth slows and renewals keep edging lower, earnings expansion could decelerate. And when growth slows in a high-multiple stock, the multiple itself often contracts. It’s a double whammy that can lead to prolonged underperformance.
I’ve seen this play out before with other beloved names. The market falls in love with a growth narrative, bids the shares up accordingly, and then—when the narrative hits even a small speed bump—sentiment shifts quickly. Suddenly, what looked like a fair premium starts feeling overdone.
- High dependence on membership fees for profitability
- Persistent, though mild, decline in renewal rates
- Forward valuation leaving little room for error
- Management’s guidance suggesting no quick reversal
Put those together, and you get a stock that’s become something of a battleground. Bulls argue the core business is unbreakable and any dip is a buying opportunity. Bears worry the golden era of effortless growth might be pausing.
The Psychology of Selling Winners
One of the hardest things in investing is selling a stock that’s treated you well. There’s that nagging voice: “What if it keeps going higher after I sell?” Or “I’m locking in gains, but maybe I should let it run longer.”
In this case, though, the decision feels disciplined rather than emotional. The position had grown to nearly 2% of the portfolio—significant exposure for a single name, especially one facing headwinds. Trimming it back rebalances risk without eliminating upside potential.
Perhaps the most interesting aspect is the timing. The shares aren’t in freefall; they’re just not charging ahead like before. Selling half now pockets enormous gains from the pandemic-era purchase while leaving room for future appreciation if membership trends stabilize.
It’s a reminder that great investing isn’t just about buying low. It’s also about knowing when to harvest those gains, particularly when the risk/reward equation starts tilting.
What This Means for Individual Investors
If you’re holding shares yourself, does this move signal it’s time to follow suit? Not necessarily. Every investor’s situation is different—time horizon, cost basis, portfolio concentration all matter.
That said, it’s worth asking some tough questions:
- How much of your portfolio is tied up in this one stock?
- Are you comfortable with the current valuation given the membership trends?
- Do you have a profit-taking plan, or are you holding indefinitely?
- Have economic pressures changed how you view “essential” subscriptions?
For long-term believers, the business fundamentals remain strong. Traffic is solid, sales per square foot impressive, and the value proposition hasn’t vanished. But for those with substantial unrealized gains—like that 200% from 2020—taking some chips off the table can provide peace of mind.
In my experience, the investors who sleep best at night are the ones who periodically rebalance, especially after big runs. It turns paper profits into real ones and frees up capital for fresh opportunities.
Broader Lessons from This Trade
Beyond this specific stock, there’s a bigger takeaway here about managing winners. Too often, we focus on finding the next hot pick while neglecting the ones already performing well. But winners can become the biggest risks if they grow too large in our portfolios.
Regular pruning—selling portions of outperformers—helps maintain diversification and locks in compounding along the way. It’s not about predicting tops; it’s about disciplined capital management.
Another lesson: even the strongest moats can face subtle erosion over time. Membership models seemed bulletproof, yet consumer behavior is shifting in small but meaningful ways. Staying attuned to those changes, rather than assuming permanence, separates great investors from the crowd.
No business is immune to change, no matter how dominant it appears today.
Finally, this move highlights the difference between a great company and a great stock. Sometimes they’re aligned, sometimes not. Right now, many would agree the company remains excellent—but the stock’s pricing reflects very high expectations that may be harder to exceed going forward.
As markets evolve, so must our strategies. Trimming positions after extraordinary gains isn’t admitting defeat; it’s practicing the art of winning sustainably.
Whether you choose to hold, trim, or add on weakness, the key is making intentional decisions based on facts, not emotions. And sometimes, the smartest move is simply saying: we’ve had a fantastic run—let’s secure some of those rewards while staying positioned for whatever comes next.
(Note: This article reflects general investment observations and is not personalized advice. Always conduct your own research or consult professionals before making investment decisions.)
