135.18 -4.78 (-3.53%) Sell

Doubt in the minds of EL investors as it delivered massive losses

13 min read

ESTEE LAUDER COMPANIES INC is a falling knife that can bleed you if you catch it today. It fell by -3.53% to close at 135.18. During the last week it fell by -2.03% and saw a maximum drawdown of -3.53% before bouncing back.

[Themes containing EL]

EL is currently in a bearish trend. Over the last three months trading short signals has not been a profitable strategy for EL's investors in general. However, this strategy had significantly lower risk when compared to Buy-and-Hold investing (which returned -3.37%). It is therefore better to tread with caution in the current downtrend by limiting your allocation to EL.


EL has been underperforming the SP500 index in recent time. It showed significant outperformance (compared to the SP500 index) from 16 Dec, 2016 to 11 Apr, 2018. Over the last 2 years 11 months and 10 days, EL outperformed the SP500 index on 53% days.

During the last three months EL delivered profits on 50% days. However, it still managed to end this period in a loss. It's best return during this period (of +7.0%) was on Monday, 3 Dec, 2018. While it's worst loss in the same period (of -7.43%) was on Wednesday, 10 Oct, 2018. The longest stort-term trends during this period were 5 profitable and losing days. The bullish trend (which returned +13.26%) started on 29 Oct, 2018 and went on till 2 Nov, 2018 while the bearish trend (which returned -3.31%) started on 16 Nov, 2018 and went on till 23 Nov, 2018.

During the last year EL had 8 profitable months and 4 loss making months. Profitable number of months of EL and SP500 index were the same. EL significantly outperformed SP500 index in Mar 2018, when it returned +8.15% compared to +4.75% returned by SP500 index during it's best month in the last one year - Jan 2018. EL had a shorter streak of profitable months than SP500 index. It only went up in 5 straight months during the last year.

The Stock Market is designed to transfer money from the Active to the Patient.
-- Warren Buffett

EL 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 EL's volatility from 17 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 EL has negative skewness in it's return distribution. This indicates that investors may need to stay invested through long periods of drawdown before expecting a recovery.

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

Based on your interest in EL you may find it interesting to know that DRH has delivered similar performance as EL and can be considered as an alternative investment candidate (to EL).

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