Don't even consider investing in BAM now, it is a really dangerous investment now
11 Dec, 201813 min read
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BROOKFIELD ASSET MANAGEMENT INC. (Foreign) was among the worst performers on Tuesday. It lost -1.32% to close at 41.09. It is currently trading -8% below it's 52 week high of 44.9.
BAM showed a down trend over the last 3 months. During this period BAM lost -2.35% and saw a maximum drawdown of -11.11%. It has been unusually choppy during this period. Long term investors are better off avoiding investing in BAM till volatility reduces and a clear trend emerges.
BAM has been underperforming the SP500 index in recent time, after having outperformed till 18 Oct, 2017. Over the last 2 years 11 months and 7 days, BAM outperformed the SP500 index on 51% days.
During the last three months BAM was mostly loss making and delivered on average -0.03% per day. It's best return during this period (of +4.57%) was on Friday, 9 Nov, 2018. While it's worst loss in the same period (of -2.63%) was on Wednesday, 10 Oct, 2018. There was initially a bullish trend during this period which started on 12 Sep, 2018 and went on till 18 Sep, 2018. The bullish trend returned +2.2% to investors. This was followed by a bearish trend that started on 2 Oct, 2018 and ended on 8 Oct, 2018. This bearish trend lost -3.6% of investor capital.
BAM had 8 profitable and 4 loss making months over the last year. During the last year, number of profitable months of BAM and SP500 index were the same. BAM was also a more risky investment than SP500 index as it's worst month in the last year, Oct 2018, returned -9.24% compared to -7.28% returned by SP500 index in Oct 2018. BAM had a longer winning streak of profitable months than SP500 index. It went up in 7 straight months (from Mar 2018 to Sep 2018) during which period it delivered +16.24%.
Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.
-- Charles Dickens
BAM 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 BAM's volatility from 14 Sep, 2018 to 11 Dec, 2018. While there was a significant surge in the SP500 index's volatility from 14 Sep, 2018 to 29 Oct, 2018.
Advanced/professional short-term investors should note that BAM has significant positive skewness in it's return distribution. This indicates that investors can expect BAM to recover from drawdowns quickly. Which makes BAM a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.
BAM has more chance of extreme outcomes than the SP500 index. Therefore, BAM must receive a lower allocation than SP500 in your portfolio. SP500 index usually has shorter drawdown period than BAM.
Based on your interest in BAM you may find it interesting to know that V and AMZN are both large caps that have shown remarkable performance and deserve to be on every investors' watchlist.
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