Don't go profit booking on ALE now, it delivered a decent return
11 Dec, 201813 min read
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ALLETE INC managed to marginally outperform the broader market on Tuesday. It gained +0.15% to close at 80.88. On a day when the overall market breadth was 35%, it closed higher than 11% of the market. In comparison, the benchmark SP500 index closed today at -0.0004%.
ALE showed a up trend over the last 3 months. During this period ALE gained +6.91% and saw a maximum drawdown of -5.24%. It has been unusually choppy during this period. Long term investors are better off avoiding investing in ALE till volatility reduces and a clear trend emerges.
ALE has been outperforming the SP500 index in recent time. Over the last 2 years 11 months and 7 days, ALE outperformed the SP500 index on 55% days.
ALE was profitable on 61% days in the last three months. During this time, it delivered on average +0.12% per day. It delivered it's worst daily return of -2.8%, during this period, on Wednesday, 19 Sep, 2018. There was initially a bearish trend during this period which started on 24 Sep, 2018 and went on till 26 Sep, 2018. The trend delivered -4.4% losses to investors. This was followed by a bullish trend that started on 5 Nov, 2018 and ended on 13 Nov, 2018. This bullish trend delivered +6.11% to investors.
On monthly basis, ALE delivered losses in more months over the last year, than profits. ALE delivered profits less regularly than SP500 index. ALE significantly outperformed SP500 index in Nov 2018, when it returned +9.97% compared to +4.75% returned by SP500 index during it's best month in the last one year - Jan 2018. ALE had a shorter streak of profitable months than SP500 index. It only went up in 4 straight months during the last year.
"It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.
ALE is becoming more volatile overall. In comparison, the SP500 index is seeing a rise in volatility. During the last three months, there was a significant surge in ALE's volatility from 13 Sep, 2018 to 5 Nov, 2018. While there was a significant surge in the SP500 index's volatility from 13 Sep, 2018 to 29 Oct, 2018.
Advanced/professional short-term investors should note that ALE has significant positive skewness in it's return distribution. This indicates that investors can expect ALE to recover from drawdowns quickly. Which makes ALE a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.
ALE has more chance of extreme outcomes than the SP500 index. Therefore, ALE must receive a lower allocation than SP500 in your portfolio. SP500 index usually has shorter drawdown period than ALE.
Based on your interest in ALE you may find it interesting to know that AYTU, DLPH and AMRH have all shown remarkable performance and qualify to be on every investor's watchlist.
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