CCU does a dead cat bounce, it's still too early to buy into it

COMPANIA CERVECERIAS UNIDAS S.A. (Foreign) outperformed the broader market today. It increased by +0.51% to close at 25.61. During the last week it delivered -0.59% and saw a maximum drawdown of -2.34% before bouncing back.

[Themes containing CCU]

CCU is currently in a bearish trend. Over the last three months trading short signals has not been a profitable strategy for CCU's investors in general. However, this strategy had significantly lower risk when compared to Buy-and-Hold investing (which returned -3.07%). It is therefore better to tread with caution in the current downtrend by limiting your allocation to CCU.

Trend

Monthly Performance

Alpha (outperformance)

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Volatility

Return distribution

CCU has been outperforming the SP500 index in recent time. It showed significant underperformance (compared to the SP500 index) from 17 Apr, 2017 to 4 Sep, 2018. Over the last 2 years 11 months and 9 days, CCU underperformed the SP500 index on 48% days. Which indicates that on days CCU underperforms the SP500 index, it's performance is marginally worse than on the days it outperforms the SP500 index.

During the last three months CCU was mostly loss making and delivered on average -0.04% per day. It's best return during this period (of +3.11%) was on Wednesday, 21 Nov, 2018. While it's worst loss in the same period (of -3.16%) was on Monday, 29 Oct, 2018. The longest stort-term trend during this period was 8 losing days, which started on 3 Oct, 2018 and ended on 12 Oct, 2018. This bearish trend lost -8.63% of investor capital.

The last 12 months saw CCU's investors making profits in 4 months and incurring losses in 8 months. CCU was less consistent in delivering monthly returs than SP500 index. CCU was also a more risky investment than SP500 index as it's worst month in the last year, Oct 2018, returned -11.04% compared to -7.28% returned by SP500 index in Oct 2018. CCU had a longer winning streak of losing months than SP500 index. It went down in 3 straight months (from Apr 2018 to Jun 2018) during which period it delivered -14.37%.

Let's not allow the voice of the people to be overwhelmed by the siren song of those who opposed regulation, who demanded that government should stand aside and let finance and business run the show.
-- David Blunkett

CCU 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 CCU's volatility from 14 Sep, 2018 to 13 Nov, 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 CCU has significant negative skewness in it's return distribution. This indicates that CCU is very risky for short-term investment and can significantly underperform for long durations.

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

On a general note (since you are interested in CCU), three instruments that are extremely volatile are VIPS, ICPT and EPIX. They must all be evaluated prudently and investors are better off avoiding them at the moment.