IRBT investors looking to exit as part of sectoral rotation
14 Dec, 201813 min read
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IROBOT CORP ranked among the worst performers today. It delivered -1.51% to close at 86.37. During the last week it delivered -5.1% and saw a maximum drawdown of -5.54% before bouncing back.
Buy-and-Hold investors in IRBT experienced a maximum drawdown of -32.29% over the last three months. It delivered -22.29% during this strong bearish trending period. There were both Long and Short signals during this period, where the short signals were significantly more profitable than the long signals. The net profit from Short signals was +10.96%.
IRBT has been underperforming the SP500 index in recent time. It showed significant outperformance (compared to the SP500 index) from 11 Feb, 2016 to 28 Aug, 2018. Over the last 2 years 11 months and 10 days, IRBT outperformed the SP500 index on 56% days.
During the last three months IRBT delivered profits on 50% days. However, it still managed to end this period in a loss. It's best return during this period (of +9.2%) was on Wednesday, 31 Oct, 2018. While it's worst loss in the same period (of -12.34%) was on Wednesday, 24 Oct, 2018. The longest stort-term trend during this period was 6 profitable days, which started on 24 Sep, 2018 and went on till 1 Oct, 2018. This bullish trend returned +6.39% to investors.
The last 12 months saw IRBT's investors making profits in 6 months and incurring losses in 6 months. IRBT was less consistent in delivering monthly returs than SP500 index. IRBT significantly outperformed SP500 index in Aug 2018, when it returned +43.22% compared to +4.75% returned by SP500 index during it's best month in the last one year - Jan 2018. IRBT had a shorter streak of profitable months than SP500 index. It only went up in 4 straight months during the last year.
The hardest thing to understand in the world is the income tax.
-- Albert Einstein
IRBT 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 IRBT's volatility from 28 Sep, 2018 to 26 Oct, 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 IRBT has significant positive skewness in it's return distribution. This indicates that investors can expect IRBT to recover from drawdowns quickly. Which makes IRBT a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.
Investors trading in IRBT 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 IRBT. Therefore, SP500 must receive a lower allocation than IRBT in your portfolio. IRBT usually has shorter drawdown period than the SP500 index.
Based on your interest in IRBT you may find it interesting to know that PTC, AAXN and KEYS are small caps that have all shown remarkable performance and qualify to be on every investor's watchlist.
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