Waiting to invest in EMR? Avoid at the moment as it was among the worst performers
07 Dec, 201813 min read
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EMERSON ELECTRIC CO was among the worst performers today. It delivered -1.32% to close at 62.95. It's recent 5 day performance has been -2.83%, -4.66%, +1.98%, +0.28% and -1.09%.
EMR showed a strong bearish trend over the last 3 months. During this period EMR delivered -17.46% and saw a maximum drawdown of -19.83%. There was a short signal during this period which returned +17.15%.
EMR has been underperforming the SP500 index in recent time. It showed significant outperformance (compared to the SP500 index) from 25 Jan, 2016 to 5 Oct, 2018. Over the last 2 years 11 months and 3 days, EMR outperformed the SP500 index on 51% days.
EMR returned losses on 56% days in the last three months. During this time, it delivered on average -0.29% per day. It delivered it's worst daily return of -4.66%, during this period, on Tuesday, 4 Dec, 2018. The longest stort-term trend during this period was 6 losing days, which started on 4 Oct, 2018 and ended on 11 Oct, 2018. This bearish trend lost -9.64% of investor capital.
The last 12 months saw EMR's investors making profits in 5 months and incurring losses in 7 months. EMR was less consistent in delivering monthly returs than SP500 index. EMR was also a more risky investment than SP500 index as it's worst month in the last year, Oct 2018, returned -12.57% compared to -7.28% returned by SP500 index in Oct 2018. EMR had a longer winning streak of losing months than SP500 index. It went down in 4 straight months (from Sep 2018 to Dec 2018) during which period it delivered -20.07%. It is interesting to note that both EMR and SP500 index significantly outperform during months when quarterly/annual results are announced.
Security depends not so much upon how much you have, as upon how much you can do without.
-- Joseph Wood Krutch
EMR 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 EMR's volatility from 10 Sep, 2018 to 15 Nov, 2018. While there was a significant surge in the SP500 index's volatility from 10 Sep, 2018 to 29 Oct, 2018.
Advanced/professional short-term investors should note that EMR has significant positive skewness in it's return distribution. This indicates that investors can expect EMR to recover from drawdowns quickly. Which makes EMR a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.
Investors trading in EMR derivatives at this moment can consider 'Covered Call' options strategy to receive better risk-adjusted returns.
EMR has more chance of extreme outcomes than the SP500 index. Therefore, EMR must receive a lower allocation than SP500 in your portfolio. SP500 index usually has shorter drawdown period than EMR.
Based on your interest in EMR you may find it interesting to know that WASH, NBHC and MDT have all performed similar to EMR and qualify as alternative investment candidates that must be evaluated for diversification.
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