116.65 +0.55 (+0.47%) Sell

Joy for IBM investors as it shows marginal outperformance

13 min read

INTERNATIONAL BUSINESS MACHINES CORP managed to outperform the broader market today. It surged by +0.47% to close at 116.65. It's recent 5 day performance has been -3.17%, -0.69%, -0.35%, +0.22% and -0.2%.

[Themes containing IBM]

IBM is currently in a bearish trend. Over the last three months 2 bearish signals have generated a profit of +9.95% for investors.


IBM has been outperforming the SP500 index in recent time. It showed significant underperformance (compared to the SP500 index) from 26 Jan, 2017 to 1 Nov, 2018. Over the last 2 years 11 months and 14 days, IBM underperformed the SP500 index on 49% days. Which indicates that on days IBM underperforms the SP500 index, it's performance is marginally worse than on the days it outperforms the SP500 index.

IBM returned losses on 56% days in the last three months. During this time, it delivered on average -0.37% per day. It delivered it's worst daily return of -7.63%, during this period, on Wednesday, 17 Oct, 2018. The longest stort-term trend during this period was 7 losing days, which started on 3 Oct, 2018 and ended on 11 Oct, 2018. This bearish trend lost -9.96% of investor capital.

During the last year IBM had 5 profitable months and 7 loss making months. IBM returned profits in fewer months than SP500 index. IBM was also a more risky investment than SP500 index as it's worst month in the last year, Oct 2018, returned -24.56% compared to -7.75% returned by SP500 index in Dec 2018. IBM had a longer winning streak of losing months than SP500 index. It went down in 5 straight months (from Feb 2018 to Jun 2018) during which period it delivered -13.42%. It is interesting to note that both IBM and SP500 index significantly outperform during months when quarterly/annual results are announced.

Greed is not a financial issue. It's a heart issue.
-- Andy Stanley

IBM is currently seeing overall fall in volatility. In comparison, the SP500 index is seeing increase in volatility. During the last three months, there was a significant surge in IBM's volatility from 2 Oct, 2018 to 30 Oct, 2018. While there was a significant surge in the SP500 index's volatility from 19 Sep, 2018 to 29 Oct, 2018.

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

Investors trading in IBM derivatives at this moment can consider 'Covered Call' options strategy to receive better risk-adjusted returns.

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

Based on your interest in IBM you may find it interesting to know that I and PRQR have both shown remarkable performance this year and deserve to be on every investors' watchlist.

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