16.82 -0.26 (-1.52%) Sell

Don't buy ETE now, it is an investor's nightmare

13 min read

ENERGY TRANSFER EQUITY, L.P. ranked among the worst performers on Thursday. It fell by -1.52% to close at 16.82. On a day when the overall market breadth was 35%, it closed higher than 79% of the market. In comparison, the benchmark SP500 index closed today at -0.0191%.

[Themes containing ETE]

ETE showed a bearish trend over the last 3 months. During this period ETE fell by -2.89% and saw a maximum drawdown of -7.02%. It has been unusually choppy during this period. Long term investors are better off avoiding investing in ETE till volatility reduces and a clear trend emerges.


ETE has been outperforming the SP500 index in recent time. It showed significant outperformance (compared to the SP500 index) from 8 Feb, 2016 to 6 Jan, 2017. Over the last 2 years 9 months and 14 days, ETE underperformed the SP500 index on 52% days.

ETE returned losses on 59% days in the last three months. During this time, it delivered on average -0.11% per day. It delivered it's best daily return of +3.79%, during this period, on Monday, 1 Oct, 2018. The longest stort-term trend during this period was 5 losing days, which started on 2 Oct, 2018 and ended on 8 Oct, 2018. This bearish trend lost -4.39% of investor capital.

During the last year ETE had 4 profitable months and 8 loss making months. ETE returned profits in fewer months than SP500 index. ETE was also a more risky investment than SP500 index as it's worst month in the last year, Feb 2018, returned -15.3% compared to -5.33% returned by SP500 index in Oct 2018. ETE had a longer winning streak of losing months than SP500 index. It went down in 3 straight months (from Aug 2018 to Oct 2018) during which period it delivered -11.32%. It is interesting to note that both ETE and SP500 index significantly outperform during months when quarterly/annual results are announced.

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ETE is currently seeing overall fall in volatility. In comparison, the SP500 index is seeing decrease in volatility. During the last three months, there was a significant surge in ETE's volatility from 20 Sep, 2018 to 18 Oct, 2018. While there was a significant surge in the SP500 index's volatility from 25 Sep, 2018 to 12 Oct, 2018.

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

Investors trading in ETE derivatives at this moment can consider 'Protective Collar' options strategy to receive better risk-adjusted returns.

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

Based on your interest in ETE you may find it interesting to know that NSPR and APRN have both shown remarkable performance and deserve to be on every investors' watchlist.

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