Don't buy JD now, it is an investor's nightmare
18 Dec, 201813 min read
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JD.COM, INC. (Foreign) has destroyed investor wealth today. It lost -1.45% to close at 21.04. It's recent 5 day performance has been -3.7%, -2.38%, +3.75%, +4.69% and +1.95%.
JD showed a strong down trend over the last 3 months. During this period JD lost -21.84% and saw a maximum drawdown of -28.44%. There were 3 short signals during this period that returned a cumulative of +2.26% to investors.
JD has been outperforming the SP500 index in recent time. Over the last 2 years 11 months and 14 days, JD underperformed the SP500 index on 51% days.
JD returned losses on 51% days in the last three months. During this time, it delivered on average -0.32% per day. It delivered it's worst daily return of -8.42%, during this period, on Monday, 19 Nov, 2018. There was initially a bullish trend during this period which started on 25 Sep, 2018 and went on till 28 Sep, 2018. The bullish trend returned +6.32% to investors. This was followed by a bearish trend that started on 4 Dec, 2018 and ended on 10 Dec, 2018. This bearish trend lost -6.99% of investor capital.
JD had 2 profitable and 10 loss making months over the last year. During the last year, JD underperformed SP500 index on monthly return basis. JD was also a more risky investment than SP500 index as it's worst month in the last year, Sep 2018, returned -16.65% compared to -7.75% returned by SP500 index in Dec 2018. JD had a longer winning streak of losing months than SP500 index. It went down in 6 straight months (from Jul 2018 to Dec 2018) during which period it delivered -55.28%.
If all the economists were laid end to end, they'd never reach a conclusion.
-- George Bernard Shaw
JD 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 JD's volatility from 20 Sep, 2018 to 2 Nov, 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 JD 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 JD derivatives at this moment can consider 'Protective Collar' options strategy to receive better risk-adjusted returns.
JD has more chance of extreme outcomes than the SP500 index. Therefore, JD must receive a lower allocation than SP500 in your portfolio. SP500 index usually has shorter drawdown period than JD.
On a general note (since you are interested in JD), two mid cap instruments that deserve special mention are ABMD and SQ. They have significantly outperformed the overall market.
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