Want to invest in PEL? Consider as it performed better than the broader market

PIRAMAL ENTERPRISES LTD performed better than the broader market on Wednesday. It returned +0.8% to close at 2357.85. On a day when the overall market breadth was 70%, it closed higher than 79% of the market. In comparison, the benchmark NIFTY-50 index closed today at -0.0084%.

[Themes containing PEL]

PEL showed a strong up trend over the last 3 months. During this period PEL returned +21.86% and saw a maximum drawdown of -13.49%. It has been unusually choppy during this period. Long term investors are better off avoiding investing in PEL till volatility reduces and a clear trend emerges.

Trend

Monthly Performance

Alpha (outperformance)

Heatmap

Volatility

Return distribution

PEL has been outperforming the NIFTY-50 index in recent time. Over the last 3 years and 1 month, PEL outperformed the NIFTY-50 index on 51% days.

During the last three months PEL was mostly profitable and delivered on average +0.34% per day. It's best return during this period (of +7.89%) was on Wednesday, 31 Oct, 2018. While it's worst loss in the same period (of -5.99%) was on Tuesday, 27 Nov, 2018. There was initially a bearish trend during this period which started on 3 Dec, 2018 and went on till 10 Dec, 2018. The trend delivered -7.35% losses to investors. This was followed by a bullish trend that started on 17 Dec, 2018 and ended on 26 Dec, 2018. This bullish trend delivered +8.0% to investors.

On monthly basis, PEL delivered profits and losses in equal number of months. PEL delivered profits in more months than NIFTY-50 index. PEL was also a more risky investment than NIFTY-50 index as it's worst month in the last year, Sep 2018, returned -28.14% compared to -6.42% returned by NIFTY-50 index in Sep 2018. PEL had a longer winning streak of profitable months than NIFTY-50 index. It went up in 3 straight months (from Jun 2018 to Aug 2018) during which period it delivered +36.89%. It is interesting to note that both PEL and NIFTY-50 index significantly outperform during months when quarterly/annual results are announced.

"The man who begins to speculate in stocks with the intention of making a fortune usually goes broke, whereas the man who trades with a view of getting good interest on his money sometimes gets rich.

PEL 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 PEL's volatility from 29 Oct, 2018 to 17 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 PEL has negative skewness in it's return distribution. This indicates that investors may need to stay invested through long periods of drawdown before expecting a recovery.

Investors trading in PEL derivatives at this moment can consider 'Long Strangle' options strategy to receive better risk-adjusted returns.

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

On a general note (since you are interested in PEL), two mid cap instruments that deserve special mention are KARURVYSYA and BATAINDIA. They have significantly outperformed the overall market.