BBL investors herd to book profits while the going is good
23 Jan, 201913 min read
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BHARAT BIJLEE LTD has destroyed investor wealth on Wednesday. It fell by -1.23% to close at 1092.7. On a day when the overall market breadth was 70%, it closed higher than 57% of the market. In comparison, the benchmark NIFTY-50 index closed today at -0.0084%.
BBL is currently in a bullish trend. Over the last three months Buy-and-Hold has been a better strategy (returning -3.66%) for BBL's investors than trading long signals.
BBL has been underperforming the NIFTY-50 index in recent time. It showed significant outperformance (compared to the NIFTY-50 index) from 16 Aug, 2016 to 1 Mar, 2018. Over the last 3 years and 1 month, BBL underperformed the NIFTY-50 index on 53% days.
During the last three months BBL was mostly loss making and delivered on average -0.04% per day. It's best return during this period (of +5.31%) was on Wednesday, 21 Nov, 2018. While it's worst loss in the same period (of -8.3%) was on Wednesday, 14 Nov, 2018. The longest stort-term trend during this period was 5 losing days, which started on 14 Nov, 2018 and ended on 20 Nov, 2018. This bearish trend lost -17.58% of investor capital.
During the last year BBL had 4 profitable months and 8 loss making months. Profitable number of months of BBL and NIFTY-50 index were the same. BBL was also a more risky investment than NIFTY-50 index as it's worst month in the last year, May 2018, returned -22.08% compared to -6.42% returned by NIFTY-50 index in Sep 2018. BBL had a longer winning streak of losing months than NIFTY-50 index. It went down in 3 straight months (from May 2018 to Jul 2018) during which period it delivered -33.77%. It is interesting to note that both BBL and NIFTY-50 index significantly outperform during months when quarterly/annual results are announced.
The challenge is not to pick the best investment. The challenge is to pick the right investment.
-- Don Connelly
BBL is currently seeing overall fall in volatility. In comparison, the NIFTY-50 index is seeing decrease in volatility. During the last three months, there was a significant fall in BBL's volatility from 24 Oct, 2018 to 21 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 BBL has significant negative skewness in it's return distribution. This indicates that BBL is very risky for short-term investment and can significantly underperform for long durations.
NIFTY-50 index has more chance of extreme outcomes than BBL. Therefore, NIFTY-50 must receive a lower allocation than BBL in your portfolio. NIFTY-50 index usually has shorter drawdown period than BBL.
Based on your interest in BBL you may find it interesting to know that IEX is highly volatile and investors investing in it must take extreme caution. Consider either reducing your exposure to IEX or sufficiently diversifying your portfolio.
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