Are you evaluating investing in ACE? Avoid as it significantly underperformed

ACTION CONST EQUIP LTD significantly underperformed on Friday. It lost -1.64% to close at 95.75. It is currently trading -50% below it's 52 week high of 193.2.

[Themes containing ACE]

ACE showed a down trend over the last 3 months. During this period ACE lost -5.43% and saw a maximum drawdown of -15.48%. There were 2 short signals during this period that returned a cumulative of +2.0% to investors.

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Monthly Performance

Alpha (outperformance)

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Return distribution

ACE has been outperforming the NIFTY-50 index in recent time. Over the last 3 years and 1 month, ACE outperformed the NIFTY-50 index on 46% days. Which indicates that on days ACE outperforms the NIFTY-50 index, it's performance is marginally better than on the days it underperforms the NIFTY-50 index.

During the last three months ACE was mostly loss making and delivered on average -0.05% per day. It's best return during this period (of +8.5%) was on Wednesday, 12 Dec, 2018. While it's worst loss in the same period (of -4.87%) was on Friday, 16 Nov, 2018. There was initially a bullish trend during this period which started on 31 Oct, 2018 and went on till 2 Nov, 2018. The bullish trend returned +8.4% to investors. This was followed by a bearish trend that started on 13 Nov, 2018 and ended on 20 Nov, 2018. This bearish trend lost -15.7% of investor capital.

ACE had 5 profitable and 7 loss making months over the last year. During the last year, number of profitable months of ACE and NIFTY-50 index were the same. ACE was also a more risky investment than NIFTY-50 index as it's worst month in the last year, Sep 2018, returned -26.33% compared to -6.42% returned by NIFTY-50 index in Sep 2018. ACE and NIFTY-50 index, both had periods of 2 consecutive losing months. It is interesting to note that both ACE and NIFTY-50 index significantly outperform during months when quarterly/annual results are announced.

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ACE is becoming less volatile overall. In comparison, the NIFTY-50 index is seeing a fall in volatility. During the last three months, there was a significant fall in ACE's volatility from 1 Nov, 2018 to 18 Jan, 2019. While there was a significant fall in the NIFTY-50 index's volatility from 31 Oct, 2018 to 5 Dec, 2018.

Advanced/professional short-term investors should note that ACE has significant negative skewness in it's return distribution. This indicates that ACE is very risky for short-term investment and can significantly underperform for long durations.

NIFTY-50 index has more chance of extreme outcomes than ACE. Therefore, NIFTY-50 must receive a lower allocation than ACE in your portfolio. NIFTY-50 index usually has shorter drawdown period than ACE.

On a general note (since you are interested in ACE), three instruments that are extremely volatile are SRIPIPES, IGARASHI and HATSUN. They must all be evaluated prudently and investors are better off avoiding them at the moment.