DISCOVER FINANCIAL SERVICES

63.26 -0.88 (-1.39%) Sell

Doubt in the minds of DFS investors as it ranked among the worst performers

13 min read

DISCOVER FINANCIAL SERVICES significantly underperformed on Thursday. It fell by -1.39% to close at 63.26 which is it's 52 week low, down -22% from it's 52 week high.

[Themes containing DFS]

DFS is currently in a bearish trend. The current bearish signal has generated a profit of +17.95% for investors in the last three months.

Trend

DFS has been underperforming the SP500 index in recent time. It showed significant underperformance (compared to the SP500 index) from 4 Jan, 2017 to 12 Sep, 2017. Over the last 2 years 11 months and 9 days, DFS underperformed the SP500 index on 47% days. Which indicates that on days DFS underperforms the SP500 index, it's performance is marginally worse than on the days it outperforms the SP500 index.

During the last three months DFS delivered profits on 50% days. However, it still managed to end this period in a loss. It's best return during this period (of +3.12%) was on Monday, 26 Nov, 2018. While it's worst loss in the same period (of -7.92%) was on Friday, 26 Oct, 2018. The longest stort-term trends during this period were 5 profitable and losing days. The bullish trend (which returned +3.1%) started on 17 Sep, 2018 and went on till 21 Sep, 2018 while the bearish trend (which returned -4.5%) started on 24 Sep, 2018 and went on till 28 Sep, 2018.

During the last year DFS had 6 profitable months and 6 loss making months. DFS returned profits in fewer months than SP500 index. DFS was also a more risky investment than SP500 index as it's worst month in the last year, Dec 2018, returned -11.28% compared to -7.28% returned by SP500 index in Oct 2018. DFS had a shorter streak of profitable months than SP500 index. It only went up in 2 straight months during the last year. It is interesting to note that both DFS and SP500 index significantly outperform during months when quarterly/annual results are announced.

A real entrepreneur is somebody who has no safety net underneath them.
-- Henry Kravis

DFS 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 DFS's volatility from 17 Sep, 2018 to 11 Dec, 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 DFS has significant positive skewness in it's return distribution. This indicates that investors can expect DFS to recover from drawdowns quickly. Which makes DFS a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.

Investors trading in DFS derivatives at this moment can consider 'Bull Call Spread' options strategy to receive better risk-adjusted returns.

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

On a general note (since you are interested in DFS), two instruments that have been extremely volatile in recent times are ICPT and OPNT. Investors in these instruments should consider reducing their exposure (to ICPT and OPNT) and diversifying their portfolios.

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