49.45 -1.18 (-2.39%) Sell

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

13 min read

KAR AUCTION SERVICES, INC. delivered massive losses on Friday. It fell by -2.39% to close at 49.45. It is currently trading -22% below it's 52 week high of 64.22.

[Themes containing KAR]

KAR showed a strong bearish trend over the last 3 months. During this period KAR fell by -21.16% and saw a maximum drawdown of -22.26%. There were 2 short signals during this period that returned a cumulative of +16.47% to investors.


KAR has been underperforming the SP500 index in recent time. It showed significant outperformance (compared to the SP500 index) from 8 Aug, 2017 to 21 Aug, 2018. Over the last 2 years 11 months and 10 days, KAR outperformed the SP500 index on 52% days.

KAR returned losses on 64% days in the last three months. During this time, it delivered on average -0.36% per day. It delivered it's worst daily return of -5.85%, during this period, on Friday, 7 Dec, 2018. The longest stort-term trend during this period was 8 losing days, which started on 19 Sep, 2018 and ended on 28 Sep, 2018. This bearish trend lost -6.32% of investor capital.

During the last year KAR had 7 profitable months and 5 loss making months. KAR returned profits in fewer months than SP500 index. KAR was also a more risky investment than SP500 index as it's worst month in the last year, Dec 2018, returned -13.46% compared to -7.28% returned by SP500 index in Oct 2018. KAR had a shorter streak of profitable months than SP500 index. It only went up in 4 straight months during the last year. It is interesting to note that both KAR and SP500 index significantly outperform during months when quarterly/annual results are announced.

What we really want to do is what we are really meant to do. When we do what we are meant to do, money comes to us, doors open for us, we feel useful, and the work we do feels like play to us.
-- Julia Cameron

KAR 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 KAR's volatility from 28 Sep, 2018 to 7 Dec, 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 KAR 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.

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

Based on your interest in KAR you may find it interesting to know that LULU and TWTR are both mid caps that have shown remarkable performance and deserve to be on every investors' watchlist.

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