35.5 +0.41 (+1.17%) Sell

ESNT does a dead cat bounce, it's still too early to buy into it

13 min read

ESSENT GROUP LTD. outperformed the broader market on Tuesday. It increased by +1.17% to close at 35.5. On a day when the overall market breadth was 35%, it closed higher than 77% of the market. In comparison, the benchmark SP500 index closed today at -0.0004%.

[Themes containing ESNT]

ESNT is currently in a bearish trend. The current bearish signal has generated a profit of +15.38% for investors in the last three months.


ESNT has been underperforming the SP500 index in recent time. It showed significant outperformance (compared to the SP500 index) from 26 Jan, 2016 to 23 Jan, 2018. Over the last 2 years 11 months and 7 days, ESNT outperformed the SP500 index on 53% days.

During the last three months ESNT was mostly loss making and delivered on average -0.35% per day. It's best return during this period (of +3.17%) was on Wednesday, 31 Oct, 2018. While it's worst loss in the same period (of -6.68%) was on Tuesday, 4 Dec, 2018. The longest stort-term trend during this period was 7 losing days, which started on 5 Oct, 2018 and ended on 15 Oct, 2018. This bearish trend lost -10.28% of investor capital.

The last 12 months saw ESNT's investors making profits in 6 months and incurring losses in 6 months. ESNT was less consistent in delivering monthly returs than SP500 index. ESNT was also a more risky investment than SP500 index as it's worst month in the last year, Apr 2018, returned -21.71% compared to -7.28% returned by SP500 index in Oct 2018. ESNT had a shorter streak of profitable months than SP500 index. It only went up in 5 straight months during the last year.

The difference between succeeding and failing is consistency.
-- Don Connelly

ESNT 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 ESNT's volatility from 13 Sep, 2018 to 12 Nov, 2018. While there was a significant surge in the SP500 index's volatility from 13 Sep, 2018 to 29 Oct, 2018.

Advanced/professional short-term investors should note that ESNT has significant positive skewness in it's return distribution. This indicates that investors can expect ESNT to recover from drawdowns quickly. Which makes ESNT a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.

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

On a general note (since you are interested in ESNT), if you are an investor in VIPS, you need to be extra careful (consider limiting your exposure or diversifying) as it is extremely unpredictable and therefore risky.

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