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What's behind Wal-Mart's lonely rally?

Wal-Mart starts 2016 strong

Wal-Mart shares are doing something pretty unusual this year: They're rising.

Of the 30 stocks in the Dow Jones industrial average, only Wal-Mart is higher on the year. It's also the seventh-best-performing stock in the index, which is down 6 percent overall.

The 5 percent rally that Wal-Mart is enjoying in 2016 represents a substantial turnabout from 2015, when Wal-Mart was actually the Dow's worst-performing stock.

If something sounds familiar about this pattern — the Dow's worst performer in one year turning into its best performer in the next — that's because it's inscribed in market lore that sinking Dow stocks are set to surge.

The "dogs of the Dow strategy," popularized by asset manager Michael O'Higgins in 1991, holds that one can beat the market simply by buying the 10 stocks in the Dow 30 paying the highest dividends. These are quite likely to be names that have sunk in the prior year, which is why they're known as "dogs."

Interestingly, that doesn't quite describe Wal-Mart, which has a dividend yield of about 3.1 percent — substantially below Chevron's 5.2 percent, or Verizon's 5 percent. Nonetheless, it appears that the stock is being seen as a port in the current storm.

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"Flight to quality and safe haven" status are behind the stock's early-2016 rebound, Raymond James analyst Budd Bugatch wrote in a Friday research note.

There may also be something else involved. While still-plummeting oil prices appear to be weighing on stocks as a whole, Wal-Mart may be one of the few beneficiaries of sinking energy prices.

Calling Wal-Mart "our best $35 oil idea" in a mid-December note, Nomura analyst Robert Drbul wrote that low oil and gas prices help Wal-Mart "for two key reasons: 1) we believe lower income demographic consumers stand to benefit most from lower gas prices, and 2) we believe its private transportation fleet (>6,650 trucks; one of the largest in the world) will realize cost benefits due to low fuel prices."

On the other hand, Erin Gibbs of S&P Investment Advisory says that given Wal-Mart's earnings picture over the next few quarters, "there are better options out there."

Still, Gibbs granted in a Monday interview on CNBC's "Power Lunch" that it's "a good stock if you want something defensive — more about capital preservation versus growth."