10.33 -0.39 (-3.82%) Sell

LFC is a falling knife, continues to bleed every investor trying to catch it

13 min read

CHINA LIFE INSURANCE CO LTD (Foreign) delivered massive losses today. It returned -3.82% to close at 10.33. It's recent 5 day performance has been -1.47%, -2.77%, +4.28%, +1.13% and -0.84%.

[Themes containing LFC]

LFC is currently in a down trend. Over the last three months trading short signals has not been a profitable strategy for LFC's investors in general. However, this strategy had significantly lower risk when compared to Buy-and-Hold investing (which returned -2.91%). It is therefore better to tread with caution in the current downtrend by limiting your allocation to LFC.


LFC has been outperforming the SP500 index in recent time. Over the last 2 years 11 months and 3 days, LFC underperformed the SP500 index on 53% days.

LFC returned losses on 53% days in the last three months. During this time, it delivered on average -0.03% per day. It delivered it's worst daily return of -5.72%, during this period, on Friday, 26 Oct, 2018. There was initially a bullish trend during this period which started on 17 Sep, 2018 and went on till 21 Sep, 2018. The bullish trend returned +6.64% to investors. This was followed by a bearish trend that started on 2 Oct, 2018 and ended on 4 Oct, 2018. This bearish trend lost -4.52% of investor capital.

On monthly basis, LFC delivered losses in more months over the last year, than profits. LFC delivered profits less regularly than SP500 index. LFC was also a more risky investment than SP500 index as it's worst month in the last year, Feb 2018, returned -12.53% compared to -7.28% returned by SP500 index in Oct 2018. LFC had a longer winning streak of losing months than SP500 index. It went down in 4 straight months (from May 2018 to Aug 2018) during which period it delivered -19.65%. It is interesting to note that both LFC and SP500 index significantly outperform during months when quarterly/annual results are announced.

The stock market clearly values companies that can deliver disruptive innovation.
-- Steve Blank

LFC 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 LFC's volatility from 1 Oct, 2018 to 2 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 LFC has significant negative skewness in it's return distribution. This indicates that LFC is very risky for short-term investment and can significantly underperform for long durations.

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

On a general note (since you are interested in LFC), two instruments that deserve special mention are TNDM and PRQR. They have significantly outperformed the overall market this year.

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