EPD is a falling knife, continues to bleed every investor trying to catch it
14 Dec, 201813 min read
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EPD has destroyed investor wealth today. On a longer term basis, investors in ENTERPRISE PRODUCTS PARTNERS L P made +0.01% per day. Friday's performance of -1.67% was a significant underperformance compared to it's daily average.
EPD showed a strong down trend over the last 3 months. During this period EPD returned -11.62% and saw a maximum drawdown of -12.3%. There was a short signal during this period which returned +9.3%.
EPD has been outperforming the SP500 index in recent time. Over the last 2 years 11 months and 10 days, EPD underperformed the SP500 index on 49% days. Which indicates that on days EPD underperforms the SP500 index, it's performance is marginally worse than on the days it outperforms the SP500 index.
EPD returned losses on 54% days in the last three months. During this time, it delivered on average -0.19% per day. It delivered it's worst daily return of -3.79%, during this period, on Tuesday, 20 Nov, 2018. There was initially a bullish trend during this period which started on 29 Oct, 2018 and went on till 1 Nov, 2018. The bullish trend returned +2.42% to investors. This was followed by a bearish trend that started on 9 Nov, 2018 and ended on 14 Nov, 2018. This bearish trend lost -5.04% of investor capital.
On monthly basis, EPD delivered losses in more months over the last year, than profits. EPD delivered profits less regularly than SP500 index. EPD significantly outperformed SP500 index in Apr 2018, when it returned +9.6% compared to +4.75% returned by SP500 index during it's best month in the last one year - Jan 2018. EPD had a longer winning streak of losing months than SP500 index. It went down in 3 straight months (from Oct 2018 to Dec 2018) during which period it delivered -11.58%. It is interesting to note that both EPD and SP500 index significantly outperform during months when quarterly/annual results are announced.
Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years.
-- Warren Buffett
EPD is becoming less volatile overall. In comparison, the SP500 index is seeing a rise in volatility. During the last three months, there was a significant surge in EPD's volatility from 18 Sep, 2018 to 2 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 EPD 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.
Investors trading in EPD derivatives at this moment can consider 'Long Straddle' options strategy to receive better risk-adjusted returns.
SP500 index has more chance of extreme outcomes than EPD. Therefore, SP500 must receive a lower allocation than EPD in your portfolio. SP500 index usually has shorter drawdown period than EPD.
On a general note (since you are interested in EPD), two large cap instruments that deserve special mention are UNH and MSFT. They have significantly outperformed the overall market.
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