BRFS is a falling knife, continues to bleed every investor trying to catch it
11 Dec, 201813 min read
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BRF S.A. (Foreign) ranked among the worst performers today. It returned -0.72% to close at 5.53. During the last week it returned -4.33% and saw a maximum drawdown of -6.43% before bouncing back.
BRFS is currently in a down trend. Over the last three months Buy-and-Hold has been a better strategy (returning +11.27%) for BRFS's investors than shorting it.
BRFS has been outperforming the SP500 index in recent time. Over the last 2 years 11 months and 7 days, BRFS underperformed the SP500 index on 52% days.
BRFS was profitable on 50% days in the last three months. During this time, it delivered on average +0.21% per day. It delivered it's best daily return of +7.04%, during this period, on Monday, 17 Sep, 2018. There was initially a bullish trend during this period which started on 13 Sep, 2018 and went on till 18 Sep, 2018. The bullish trend returned +8.17% to investors. This was followed by a bearish trend that started on 8 Nov, 2018 and ended on 13 Nov, 2018. This bearish trend lost -14.77% of investor capital.
On monthly basis, BRFS delivered losses in more months over the last year, than profits. BRFS delivered profits less regularly than SP500 index. BRFS was also a more risky investment than SP500 index as it's worst month in the last year, Mar 2018, returned -24.7% compared to -7.28% returned by SP500 index in Oct 2018. BRFS had a longer winning streak of losing months than SP500 index. It went down in 3 straight months (from Jan 2018 to Mar 2018) during which period it delivered -44.75%. It is interesting to note that both BRFS and SP500 index significantly outperform during months when quarterly/annual results are announced.
Buy when everyone else is selling and hold until everyone else is buying. That's not just a catchy slogan. It's the very essence of successful investing.
-- J. Paul Getty
BRFS is becoming less volatile overall. In comparison, the SP500 index is seeing a rise in volatility. During the last three months, there was a significant surge in BRFS's volatility from 19 Sep, 2018 to 31 Oct, 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 BRFS has positive skewness in it's return distribution. This indicates that investors can expect BRFS to make attempts to recover from drawdowns quickly. Which makes BRFS a good candidate for momentum based trading on short-term bullish trends or counter-trends.
SP500 index has more chance of extreme outcomes than BRFS. Therefore, SP500 must receive a lower allocation than BRFS in your portfolio. SP500 index usually has shorter drawdown period than BRFS.
Based on your interest in BRFS you may find it interesting to know that AMD is a mid cap that has shown remarkable performance and deserves to be on every investors' watchlist.
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