BRAZILIAN DISTRIBUTION CO COMPANHIA BRASILEIRA DE DISTR CBD (FOREIGN)

20.59 0.0 (0.0%) Sell

CBD continues its fall as more investors loose confidence

13 min read

BRAZILIAN DISTRIBUTION CO COMPANHIA BRASILEIRA DE DISTR CBD (Foreign) underperformed broader market on Monday. It fell by 0.0% to close at 20.59. On a day when the overall market breadth was 34%, it closed higher than 80% of the market. In comparison, the benchmark SP500 index closed today at -0.0191%.

[Themes containing CBD]

CBD showed a bullish trend over the last 3 months. During this period CBD increased by +7.07% and saw a maximum drawdown of -8.81%. It has been unusually choppy during this period. Long term investors are better off avoiding investing in CBD till volatility reduces and a clear trend emerges.

Trend

CBD has been underperforming the SP500 index in recent time. It showed significant outperformance (compared to the SP500 index) from 21 Jan, 2016 to 20 Sep, 2017. Over the last 2 years 11 months and 10 days, CBD outperformed the SP500 index on 51% days.

During the last three months CBD was mostly profitable and delivered on average +0.14% per day. It's best return during this period (of +7.6%) was on Thursday, 1 Nov, 2018. While it's worst loss in the same period (of -4.2%) was on Wednesday, 10 Oct, 2018. The longest stort-term trend during this period was 5 profitable days, which started on 21 Nov, 2018 and went on till 28 Nov, 2018. This bullish trend returned +7.72% to investors.

During the last year CBD had 4 profitable months and 8 loss making months. CBD returned profits in fewer months than SP500 index. CBD significantly outperformed SP500 index in Jul 2018, when it returned +11.38% compared to +4.75% returned by SP500 index during it's best month in the last one year - Jan 2018. CBD 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 -16.3%. It is interesting to note that both CBD and SP500 index significantly outperform during months when quarterly/annual results are announced.

You must gain control over your money or the lack of it will forever control you.
-- Dave Ramsey

CBD is currently seeing overall fall in volatility. In comparison, the SP500 index is seeing increase in volatility. During the last three months, there was a significant surge in CBD's volatility from 18 Sep, 2018 to 1 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 CBD has significant positive skewness in it's return distribution. This indicates that investors can expect CBD to recover from drawdowns quickly. Which makes CBD 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 CBD. Therefore, SP500 must receive a lower allocation than CBD in your portfolio. SP500 index usually has shorter drawdown period than CBD.

On a general note (since you are interested in CBD), three instruments that have performed similar to CBD are LMRK, CHEF and TPH. They must all be evaluated as alternative investment options and for diversification.

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