BORGWARNER INC

34.63 +0.17 (+0.49%) Sell

BWA investors considering profit booking at current levels

13 min read

BORGWARNER INC outperformed the broader market on Friday. It increased by +0.49% to close at 34.63. On a day when the overall market breadth was 35%, it closed higher than 67% of the market. In comparison, the benchmark SP500 index closed today at -0.0191%.

[Themes containing BWA]

Buy-and-Hold investors in BWA experienced a maximum drawdown of -24.73% over the last three months. It fell by -21.56% during this strong bearish trending period. There were both Long and Short signals during this period, where the short signals were significantly more profitable than the long signals. The net profit from Short signals was +11.55%.

Trend

BWA has been underperforming the SP500 index in recent time. It showed significant underperformance (compared to the SP500 index) from 30 Nov, 2017 to 19 Oct, 2018. Over the last 2 years 11 months and 10 days, BWA underperformed the SP500 index on 47% days. Which indicates that on days BWA underperforms the SP500 index, it's performance is marginally worse than on the days it outperforms the SP500 index.

During the last three months BWA was mostly loss making and delivered on average -0.35% per day. It's best return during this period (of +5.39%) was on Thursday, 25 Oct, 2018. While it's worst loss in the same period (of -7.49%) was on Tuesday, 4 Dec, 2018. The longest stort-term trend during this period was 5 losing days, which started on 21 Sep, 2018 and ended on 27 Sep, 2018. This bearish trend lost -6.75% of investor capital.

During the last year BWA had 5 profitable months and 7 loss making months. BWA returned profits in fewer months than SP500 index. BWA was also a more risky investment than SP500 index as it's worst month in the last year, Feb 2018, returned -12.76% compared to -7.28% returned by SP500 index in Oct 2018. BWA had a longer winning streak of losing months than SP500 index. It went down in 3 straight months (from Aug 2018 to Oct 2018) during which period it delivered -14.64%. It is interesting to note that both BWA and SP500 index significantly outperform during months when quarterly/annual results are announced.

Minimizing downside risk while maximizing the upside is a powerful concept.
-- Mohnish Pabrai

BWA is currently seeing overall increase in volatility. In comparison, the SP500 index is seeing increase in volatility. During the last three months, there was a significant surge in BWA's volatility from 17 Sep, 2018 to 29 Oct, 2018. While there was a significant surge in the SP500 index's volatility from 25 Sep, 2018 to 29 Oct, 2018.

Advanced/professional short-term investors should note that BWA has significant positive skewness in it's return distribution. This indicates that investors can expect BWA to recover from drawdowns quickly. Which makes BWA a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.

BWA has more chance of extreme outcomes than the SP500 index. Therefore, BWA must receive a lower allocation than SP500 in your portfolio. BWA usually has shorter drawdown period than the SP500 index.

Based on your interest in BWA you may find it interesting to know that KEYS, AAXN and EHC are small caps that have all shown remarkable performance and qualify to be on every investor's watchlist.

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