Winmark’s Low‑Beta Shield Hides a Hidden Drawdown Hazard

Why the defensive profile may mask persistent underperformance amid today’s high‑volatility rally

WINA Winmark Corporation

In this report

01

Returns Overview

Period returns, alpha, cumulative performance, distributions

P. 2-3

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02

Volatility Analysis

Annualized volatility, downside deviation, drawdowns

P. 4-5

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03

Beta & Correlation

Trailing, upside, downside beta, systematic risk

P. 6-7

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04

Risk-Adjusted Returns

Sharpe, Sortino, Calmar, Information, Treynor

P. 8-9

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05

Market Regime Analysis

Bull/bear behavior, capture ratios

P. 10-11

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06

Investment Highlights & Risk Summary

Executive summary, risk flags, rankings

P. 12-13

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Returns Overview

Winmark Corporation (WINA) — Return Performance

Winmark Corporation delivered a mixed return profile over the past five years, posting modest short‑term underperformance but strong long‑term outperformance relative to its consumer‑cyclical peers. While the stock fell 11.69% over the trailing three months and posted near‑zero gain over one year, it generated a cumulative 121.97% return over five years, eclipsing the sector’s 88.43% benchmark. The alpha figures reveal that the company has been a net detractor in recent periods (alpha of -24.78% over three months) but a significant contributor over longer horizons (alpha of +50.15% over five years).

Period Returns vs S&P 500 & XLY

Monthly Returns Heatmap

WINA

Winmark’s short‑term performance lagged the sector, with a 3‑month return of -11.69% versus the sector’s -17.08%, yielding an alpha of -24.78%. Over longer horizons the company outperformed markedly, delivering 20.59% over three years (alpha -45.32%) and 121.97% over five years (alpha +50.15%), indicating a strong reversal from early‑term weakness to sustained growth.

Returns Overview

Winmark Corporation (WINA) — Return Charts

Volatility Analysis

Winmark Corporation (WINA) — Volatility Profile

Winmark Corporation exhibits markedly higher price variability than the broader market, with an annualized volatility of 29.0% versus the S&P 500’s 17.78%, indicating roughly 63% more dispersion in returns. The stock’s downside risk profile is pronounced: a downside deviation of 20.88% signals that negative returns are substantially larger than the market’s typical upside moves, and the historic maximum drawdown of –45.45% from February to April 2020 reflects both depth and rapidity of loss during stress periods. Recent short‑term volatility remains elevated; the 60‑day vol of 38.54% and the 252‑day vol of 37.73% both exceed the long‑term average of 29.0%, suggesting that market participants currently perceive heightened uncertainty around the business.

Volatility Metrics

WINA

Winmark’s volatility is significantly above the benchmark, translating into a higher risk premium but also greater exposure to adverse market moves. The downside deviation of 20.88% and a max drawdown of –45.45% over roughly 14 months underscore vulnerability during economic downturns, yet the subsequent recovery by July 2021 demonstrates resilience once conditions improve. Persistent elevated trailing volatilities (60‑day at 38.54%, 252‑day at 37.73%) indicate that recent market sentiment remains cautious, keeping risk metrics above the historical norm.

Annualized volatility is 63% higher than the S&P 500.
Downside deviation of 20.88% points to larger negative swings relative to typical market upside.
Maximum drawdown depth of –45.45% occurred over a 1.5‑year window, highlighting substantial downside exposure.
Both 60‑day and 252‑day volatilities are above the long‑term average, signaling heightened current risk perception.

Positive Characteristics
The stock recovered fully from its deepest drawdown within 17 months, showing strong bounce‑back capability.
Despite elevated volatility, the company’s business model of franchise-owned resale stores provides diversified cash flow streams that can mitigate long‑term earnings volatility.

Volatility Analysis

Winmark Corporation (WINA) — Volatility & Drawdown Charts

Beta & Correlation

Winmark Corporation (WINA) — Beta Profile

Winmark Corporation exhibits a trailing beta of 0.671 versus the S&P 500, placing it firmly in the defensive range (<0.8). This indicates that the stock moves less than the broad market on average, offering lower volatility during market rallies and downturns. However, the asymmetric upside (0.607) and downside (0.751) betas reveal a modest tilt toward greater sensitivity when markets decline, suggesting that losses may be amplified relative to gains in bullish periods. The overall R-squared of 0.169 and correlation of 0.411 imply that only about 17% of the stock’s variance is explained by market movements, leaving roughly 83% driven by idiosyncratic factors, which enhances diversification benefits for a portfolio heavily weighted toward broader equities. Comparing the market beta (0.671) with the sector beta (0.548) shows that approximately 18% of Winmark’s risk stems from consumer‑cyclical dynamics, while the remaining exposure is primarily company‑specific, underscoring the importance of assessing both macro and micro drivers.

Beta & Correlation Metrics

WINA

Winmark’s market beta of 0.671 classifies it as defensive, meaning its price tends to underreact to broad market swings, which can cushion portfolio volatility during equity corrections. The downside beta of 0.751 exceeds the upside beta of 0.607, indicating a slightly higher sensitivity on market declines—a nuance that risk managers should monitor when constructing downside‑protected strategies. With an R-squared of only 16.9%, most of its price movement is idiosyncratic, offering meaningful diversification, while the sector beta of 0.548 signals modest exposure to consumer cyclical trends; thus, the bulk of its risk originates from company‑specific fundamentals rather than sector cycles.

Trailing market beta (0.671) places Winmark in a defensive stance, reducing overall portfolio volatility.
Downside beta (0.751) exceeds upside beta (0.607), highlighting asymmetrical risk that amplifies losses during market downturns.
R-squared of 16.9% shows the stock is largely driven by idiosyncratic factors, enhancing diversification benefits.
Systematic risk accounts for only 16.9% of total variance, with idiosyncratic risk comprising 83.1%.
Sector beta (0.548) indicates that roughly one‑fifth of the stock’s risk is linked to consumer cyclical movements, while the remainder is company‑specific.

Positive Characteristics
Defensive market beta provides a buffer against broad equity sell‑offs.
Low R-squared and high idiosyncratic risk contribute to strong diversification potential within mixed‑asset portfolios.

Beta & Correlation

Winmark Corporation (WINA) — Rolling Beta

Positive Notes

Defensive market beta provides a buffer against broad equity sell‑offs.

Low R-squared and high idiosyncratic risk contribute to strong diversification potential within mixed‑asset portfolios.

Risk-Adjusted Returns

Winmark Corporation (WINA) — Risk-Adjusted Performance

Winmark Corporation delivers modest risk-adjusted returns, reflected in a Sharpe ratio of 0.519 and a Sortino ratio of 0.721. While both metrics fall short of the >1.0 benchmark for strong performance, the higher Sortino indicates that downside volatility is less pronounced than overall volatility, suggesting a relatively smoother loss profile. The Calmar ratio of 0.411 points to a return-to-drawdown relationship that is modest, and an Information Ratio of 0.217 signals limited but positive alpha generation relative to its benchmark.

Risk-free rate: 3.63% (Fed Funds Rate)

Risk-Adjusted Metrics

WINA

Winmark's Sharpe ratio of 0.519 implies the stock generates roughly $0.52 of excess return for each unit of total risk, which is below the threshold investors typically deem attractive. However, the Sortino ratio of 0.721 exceeds the Sharpe figure, highlighting that the company experiences less volatility on the downside side and thus offers a more favorable risk profile when losses are considered. The Calmar ratio of 0.411 suggests that historical peak-to-trough drawdowns have eroded a significant portion of returns, emphasizing the need for investors to monitor potential capital loss during market stress.

Sharpe ratio below 1.0 indicates limited reward per unit of total risk.
Sortino ratio exceeds Sharpe, reflecting a comparatively gentle downside volatility.
Calmar ratio under 0.5 points to sizable drawdowns relative to returns.
Information Ratio of 0.217 shows modest but consistent alpha generation.

Positive Characteristics
Higher Sortino than Sharpe suggests the stock’s losses are less volatile than its overall price swings.
Positive Information Ratio indicates the company has delivered some excess return over its benchmark.

Risk-Adjusted Returns

Winmark Corporation (WINA) — Rolling Sharpe & Sortino

Positive Notes

Higher Sortino than Sharpe suggests the stock’s losses are less volatile than its overall price swings.

Positive Information Ratio indicates the company has delivered some excess return over its benchmark.

Market Regime Analysis

Winmark Corporation (WINA) — Regime Behavior

Winmark Corporation exhibits a clear pattern of moderated returns across market cycles, delivering its strongest performance in calm up‑trends (Bull‑LowVol) where it averages 2.29% monthly returns over 63 months. In more turbulent rising markets (Bull‑HighVol), the average return falls to 1.6%, reflecting sensitivity to heightened volatility even when broader equity sentiment remains positive. During bearish periods, the stock’s resilience is evident: in orderly declines (Bear‑LowVol) it still generates a modest 1.05% monthly gain, while in volatile downturns (Bear‑HighVol) returns contract sharply to 0.23%, underscoring the difficulty of sustaining growth when market stress peaks. The upside capture of 81.1% paired with a downside capture of only 22.8% yields a capture ratio of 3.56, indicating that Winmark captures a substantial share of market gains while limiting losses, a hallmark of defensive equities.

Current Market Regime: Bull-HighVol

Bull-LowVol = calm uptrend • Bull-HighVol = volatile uptrend • Bear-LowVol = orderly decline • Bear-HighVol = crisis

Regime Returns & Capture Ratios

WINA

In Bull‑LowVol regimes, Winmark’s 2.29% average monthly return demonstrates its ability to thrive when investor confidence is high and volatility subdued, likely driven by steady franchise revenues and low leverage. The shift to Bull‑HighVol sees returns dip to 1.6%, suggesting that while the business model remains robust, earnings are more exposed to consumer discretionary pressures in volatile environments. In Bear‑LowVol markets, a 1.05% positive return signals defensive qualities, as the company’s franchise structure and cash‑flow generation help offset broader equity weakness. However, during Bear‑HighVol periods the average return of only 0.23% reflects limited upside potential when market panic intensifies, though the low downside capture (22.8%) still cushions losses.

Market Regime Analysis

Winmark Corporation (WINA) — Regime & Capture Charts

Regime Timeline

Winmark’s capture ratio of 3.56 far exceeds the neutral benchmark of 1.0, indicating superior upside participation with minimal downside exposure.
The stock remains defensive in Bear‑LowVol regimes, delivering positive returns while many peers decline.
Performance degrades noticeably in high‑volatility environments, both bullish and bearish, highlighting volatility sensitivity.
Current Bull‑HighVol regime aligns with a 1.6% average monthly return, below its peak but still positive, supported by strong upside capture.

Positive Characteristics
High upside capture (81.1%) ensures the stock participates in market rallies effectively.
Low downside capture (22.8%) protects capital during market drawdowns, reinforcing a defensive profile.

Investment Highlights & Risk Summary

Winmark Corporation (WINA) — Summary & Implications

Winmark Corporation delivered a flat 0.23% total return over the past year while underperforming both the S&P 500 (alpha -18.76%) and its consumer‑cyclical peer group (sector alpha -5.86%). The stock’s beta of 0.671 indicates lower sensitivity to market moves, yet volatility remains high at an annualized 29.0% and a historic max drawdown of -45.45% signals substantial downside risk. Positive risk‑adjusted figures—Sharpe 0.519 and Sortino 0.721—are modest but reflect the company’s ability to generate excess returns per unit of total and downside risk, respectively. The upside capture of 81.1% versus a very low downside capture of 22.8% suggests that the business tends to participate in market rallies while limiting losses during downturns, an asymmetry that may appeal to defensive‑biased investors despite the deep drawdown flag.

Summary Dashboard

Investment Highlights

Upside capture of 81.1% combined with a downside capture of only 22.8% yields a capture ratio of 3.55, indicating the stock participates in market gains while preserving capital in declines.
Beta of 0.671 is well below the market benchmark of 1.0, suggesting lower systematic risk and reduced portfolio volatility exposure.
Sortino ratio of 0.721 exceeds the Sharpe ratio (0.519), highlighting that downside‑adjusted returns are stronger than total risk‑adjusted returns.
Sector beta of 0.548 reinforces a defensive tilt relative to the broader consumer discretionary sector, which may aid diversification within XLY allocations.

Risk-Return Rankings

WINA MODERATE

Moderate risk‑adjusted return profile with low market sensitivity but high absolute volatility and a historic deep drawdown.

Strength: Favorable upside/downside capture asymmetry (81.1% vs 22.8%).

Concern: Maximum historical drawdown of -45.45%.

Key Takeaways

The stock’s low beta and defensive capture profile can dampen portfolio volatility in market downturns.
High absolute volatility (29%) and a deep drawdown flag highlight the need for careful position sizing.
Modest risk‑adjusted metrics suggest limited premium for the level of risk taken.
Underperformance versus both the S&P 500 and consumer cyclical sector indicates that price appreciation may be constrained in the near term.

PORTFOLIO IMPLICATIONS

Winmark’s low beta and strong downside capture make it a candidate for defensive weighting within a consumer‑cyclical allocation, especially for investors seeking to reduce portfolio drawdowns. However, its elevated volatility and historical deep loss episode warrant limiting exposure to a modest percentage of the overall equity tilt, pairing it with higher‑beta, higher‑return assets to balance risk‑adjusted performance across the 6‑18 month horizon.

WINA

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Report written 2026-06-07 • Finexus

Disclaimer

This report is generated by Finexus and is provided for informational purposes only. It does not constitute investment advice, a recommendation, or an offer or solicitation to buy or sell any security.

The analysis is based on publicly available data from sources believed to be reliable, but Finexus does not guarantee its accuracy, completeness, or timeliness. Valuation estimates, projections, and any forward-looking statements are model outputs based on historical data and assumptions that may not hold in the future.

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