Don't buy DG now, it is a really dangerous investment now
14 Dec, 201813 min read
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DOLLAR GENERAL CORP was among the worst performers on Friday. It fell by -1.11% to close at 104.98. It is currently trading +21% above it's 52 week low of 86.05 and is down only -10% from it's 52 week high.
DG showed a bearish trend over the last 3 months. During this period DG fell by -2.12% and saw a maximum drawdown of -12.62%. There were 2 short signals during this period that returned a cumulative of +2.33% to investors.
DG has been underperforming the SP500 index in recent time. It showed significant underperformance (compared to the SP500 index) from 27 Jun, 2016 to 11 Jul, 2017. Over the last 2 years 11 months and 10 days, DG outperformed the SP500 index on 51% days.
DG was profitable on 53% days in the last three months. During this time, it delivered on average -0.02% per day. It delivered it's worst daily return of -6.8%, during this period, on Tuesday, 4 Dec, 2018. The longest stort-term trend during this period was 9 losing days, which started on 9 Nov, 2018 and ended on 21 Nov, 2018. This bearish trend lost -10.92% of investor capital.
During the last year DG had 7 profitable months and 5 loss making months. DG returned profits in fewer months than SP500 index. DG significantly outperformed SP500 index in Jun 2018, when it returned +12.71% compared to +4.75% returned by SP500 index during it's best month in the last one year - Jan 2018. DG had a shorter streak of profitable months than SP500 index. It only went up in 5 straight months during the last year. It is interesting to note that both DG and SP500 index significantly outperform during months when quarterly/annual results are announced.
"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.
DG 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 DG's volatility from 1 Oct, 2018 to 7 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 DG has significant positive skewness in it's return distribution. This indicates that investors can expect DG to recover from drawdowns quickly. Which makes DG a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.
Investors trading in DG derivatives at this moment can consider 'Covered Call' options strategy to receive better risk-adjusted returns.
SP500 index has more chance of extreme outcomes than DG. Therefore, SP500 must receive a lower allocation than DG in your portfolio. DG usually has shorter drawdown period than the SP500 index.
Based on your interest in DG you may find it interesting to know that ICPT and OPNT are highly volatile and therefore risky. Investors should consider limiting their exposure to these instruments (because of their volatile nature).
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