BMI investors herd to book profits while the going is good
13 Dec, 201813 min read
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BADGER METER INC ranked among the worst performers today. It returned -0.64% to close at 54.55. During the last week it returned +1.49% and saw a maximum drawdown of -0.64% before bouncing back.
Buy-and-Hold investors in BMI experienced a maximum drawdown of -12.81% over the last three months. It returned +0.09% during this flat trending period. There were both Long and Short signals during this period, while the long signals were marginally more profitable than the short signals. The net profit from Long signals was +1.73%.
BMI has been outperforming the SP500 index in recent time. Over the last 2 years 11 months and 9 days, BMI outperformed the SP500 index on 51% days.
During the last three months BMI delivered losses on 54% days. However, it still managed to end this period in a profit. It's best return during this period (of +4.15%) was on Tuesday, 16 Oct, 2018. While it's worst loss in the same period (of -4.76%) was on Wednesday, 10 Oct, 2018. There was initially a bearish trend during this period which started on 21 Sep, 2018 and went on till 26 Sep, 2018. The trend delivered -2.69% losses to investors. This was followed by a bullish trend that started on 21 Nov, 2018 and ended on 3 Dec, 2018. This bullish trend delivered +9.61% to investors.
On monthly basis, BMI delivered profits and losses in equal number of months. BMI delivered profits less regularly than SP500 index. BMI significantly outperformed SP500 index in Jul 2018, when it returned +14.74% compared to +4.75% returned by SP500 index during it's best month in the last one year - Jan 2018. BMI had a shorter streak of profitable months than SP500 index. It only went up in 4 straight months during the last year.
"There can be no rise in the value of labour without a fall of profits.
BMI 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 BMI's volatility from 18 Sep, 2018 to 17 Oct, 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 BMI has significant positive skewness in it's return distribution. This indicates that investors can expect BMI to recover from drawdowns quickly. Which makes BMI a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.
SP500 index has more chance of extreme outcomes than BMI. Therefore, SP500 must receive a lower allocation than BMI in your portfolio. BMI usually has shorter drawdown period than the SP500 index.
Based on your interest in BMI you may find it interesting to know that IMTE is highly volatile and investors investing in it must take extreme caution. Consider either reducing your exposure to IMTE or sufficiently diversifying your portfolio.
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