31.82 -1.51 (-4.73%) Buy

Are you evaluating investing in LB? Wait as it performed worse than the broader market

13 min read

LB was among the worst performers today. On a longer term basis, investors in L BRANDS, INC. made -0.01% per day. Friday's performance of -4.73% was a significant underperformance compared to it's daily average.

[Themes containing LB]

LB showed a strong up trend over the last 3 months. During this period LB grew by +14.75% and saw a maximum drawdown of -23.2%. It has been unusually choppy during this period. Long term investors are better off avoiding investing in LB till volatility reduces and a clear trend emerges.


LB has been outperforming the SP500 index in recent time. Over the last 2 years 11 months and 3 days, LB underperformed the SP500 index on 49% days. Which indicates that on days LB underperforms the SP500 index, it's performance is marginally worse than on the days it outperforms the SP500 index.

During the last three months LB was mostly profitable and delivered on average +0.28% per day. It's best return during this period (of +7.5%) was on Thursday, 11 Oct, 2018. While it's worst loss in the same period (of -17.71%) was on Tuesday, 20 Nov, 2018. There was initially a bullish trend during this period which started on 1 Nov, 2018 and went on till 8 Nov, 2018. The bullish trend returned +13.35% to investors. This was followed by a bearish trend that started on 13 Nov, 2018 and ended on 20 Nov, 2018. This bearish trend lost -24.54% of investor capital.

LB had 4 profitable and 8 loss making months over the last year. During the last year, LB underperformed SP500 index on monthly return basis. LB was also a more risky investment than SP500 index as it's worst month in the last year, Mar 2018, returned -22.54% compared to -7.28% returned by SP500 index in Oct 2018. LB had a longer winning streak of losing months than SP500 index. It went down in 5 straight months (from Jan 2018 to May 2018) during which period it delivered -49.08%.

Opportunity is missed by most people because it is dressed in overalls and looks like work.
-- Thomas Edison

LB is becoming more volatile overall. In comparison, the SP500 index is seeing a rise in volatility. During the last three months, there was a significant surge in LB's volatility from 28 Sep, 2018 to 27 Nov, 2018. While there was a significant surge in the SP500 index's volatility from 10 Sep, 2018 to 29 Oct, 2018.

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

Investors trading in LB derivatives at this moment can consider 'Bear Put Spread' options strategy to receive better risk-adjusted returns.

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

On a general note (since you are interested in LB), two mid cap instruments that deserve special mention are SQ and AMD. They have significantly outperformed the overall market.

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