CL investors herd to book profits while the going is good

COLGATE PALMOLIVE CO significantly underperformed today. It delivered -0.46% to close at 65.17. It's recent 5 day performance has been +0.29%, +1.13%, +1.59%, +1.32% and -0.82%.

[Themes containing CL]

CL showed a bearish trend over the last 3 months. During this period CL delivered -5.29% and saw a maximum drawdown of -16.23%. It has been unusually choppy during this period. Long term investors are better off avoiding investing in CL till volatility reduces and a clear trend emerges.

Trend

Monthly Performance

Alpha (outperformance)

Heatmap

Volatility

Return distribution

CL has been outperforming the SP500 index in recent time. It showed significant underperformance (compared to the SP500 index) from 8 Feb, 2016 to 8 Nov, 2018. Over the last 2 years 11 months and 10 days, CL underperformed the SP500 index on 49% days. Which indicates that on days CL underperforms the SP500 index, it's performance is marginally worse than on the days it outperforms the SP500 index.

During the last three months CL was mostly loss making and delivered on average -0.07% per day. It's best return during this period (of +4.76%) was on Friday, 9 Nov, 2018. While it's worst loss in the same period (of -6.64%) was on Friday, 26 Oct, 2018. The longest stort-term trends during this period were 4 profitable and losing days. The bullish trend (which returned +1.92%) started on 12 Oct, 2018 and went on till 17 Oct, 2018 while the bearish trend (which returned -3.45%) started on 24 Sep, 2018 and went on till 27 Sep, 2018.

The last 12 months saw CL's investors making profits in 6 months and incurring losses in 6 months. CL was less consistent in delivering monthly returs than SP500 index. CL was also a more risky investment than SP500 index as it's worst month in the last year, Oct 2018, returned -11.21% compared to -7.28% returned by SP500 index in Oct 2018. CL had a shorter streak of profitable months than SP500 index. It only went up in 2 straight months during the last year.

"Well, I think that there's a very thin dividing line between success and failure. And I think if you start a business without financial backing, you're likely to go the wrong side of that dividing line.

CL 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 CL's volatility from 1 Oct, 2018 to 30 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 CL has significant positive skewness in it's return distribution. This indicates that investors can expect CL to recover from drawdowns quickly. Which makes CL a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.

Investors trading in CL derivatives at this moment can consider 'Married Put' options strategy to receive better risk-adjusted returns.

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

Based on your interest in CL you may find it interesting to know that ICPT and NVCN are highly volatile and therefore risky. Investors should consider limiting their exposure to these instruments (because of their volatile nature).