CATO investors dump it for better alternatives
13 Dec, 201813 min read
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CATO CORP has destroyed investor wealth today. It lost -3.91% to close at 13.75. During the last week it lost -2.96% and saw a maximum drawdown of -4.38% before bouncing back.
CATO is currently in a down trend. The current bearish signal has generated a profit of +34.55% for investors in the last three months.
CATO has been underperforming the SP500 index in recent time, after having outperformed till 2 Feb, 2016. Over the last 2 years 11 months and 9 days, CATO underperformed the SP500 index on 52% days.
During the last three months CATO was mostly loss making and delivered on average -0.63% per day. It's best return during this period (of +4.93%) was on Tuesday, 30 Oct, 2018. While it's worst loss in the same period (of -8.48%) was on Thursday, 8 Nov, 2018. There was initially a bullish trend during this period which started on 4 Oct, 2018 and went on till 10 Oct, 2018. The bullish trend returned +7.42% to investors. This was followed by a bearish trend that started on 14 Nov, 2018 and ended on 20 Nov, 2018. This bearish trend lost -11.87% of investor capital.
CATO had 4 profitable and 8 loss making months over the last year. During the last year, CATO underperformed SP500 index on monthly return basis. CATO significantly outperformed SP500 index in May 2018, when it returned +40.84% compared to +4.75% returned by SP500 index during it's best month in the last one year - Jan 2018. CATO had a longer winning streak of losing months than SP500 index. It went down in 6 straight months (from Jul 2018 to Dec 2018) during which period it delivered -47.84%. It is interesting to note that both CATO and SP500 index significantly outperform during months when quarterly/annual results are announced.
Happiness lies in the joy of achievement and the thrill of creative effort.
-- Franklin D. Roosevelt
CATO 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 CATO's volatility from 17 Sep, 2018 to 26 Nov, 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 CATO has significant positive skewness in it's return distribution. This indicates that investors can expect CATO to recover from drawdowns quickly. Which makes CATO 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 CATO. Therefore, SP500 must receive a lower allocation than CATO in your portfolio. SP500 index usually has shorter drawdown period than CATO.
Based on your interest in CATO you may find it interesting to know that LULU, AMD and SQ are mid caps that have all shown remarkable performance and qualify to be on every investor's watchlist.
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