LFUS investors herd to book profits while the going is good
14 Dec, 201813 min read
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LITTELFUSE INC is a falling knife that can bleed you if you catch it today. It lost -2.74% to close at 169.14. During the last week it lost -2.04% and saw a maximum drawdown of -3.18% before bouncing back.
LFUS is currently in a up trend. Over the last three months trading long signals has not been a profitable strategy for LFUS's investors in general. However, this strategy had significantly lower risk when compared to Buy-and-Hold investing (which returned -22.37%). It is therefore better to tread with caution in the current uptrend by limiting your allocation to LFUS.
LFUS has been underperforming the SP500 index in recent time, after having outperformed till 20 Jun, 2018. Over the last 2 years 11 months and 10 days, LFUS outperformed the SP500 index on 51% days.
During the last three months LFUS was mostly loss making and delivered on average -0.37% per day. It's best return during this period (of +7.13%) was on Wednesday, 31 Oct, 2018. While it's worst loss in the same period (of -6.13%) was on Tuesday, 4 Dec, 2018. There was initially a bearish trend during this period which started on 21 Sep, 2018 and went on till 26 Sep, 2018. The trend delivered -6.76% losses to investors. This was followed by a bullish trend that started on 12 Oct, 2018 and ended on 17 Oct, 2018. This bullish trend delivered +4.82% to investors.
LFUS had 6 profitable and 6 loss making months over the last year. During the last year, LFUS underperformed SP500 index on monthly return basis. LFUS significantly outperformed SP500 index in May 2018, when it returned +16.12% compared to +4.75% returned by SP500 index during it's best month in the last one year - Jan 2018. LFUS had a shorter streak of profitable months than SP500 index. It only went up in 2 straight months during the last year.
"Surplus wealth is a sacred trust which its possessor is bound to administer in his lifetime for the good of the community.
LFUS 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 LFUS's volatility from 17 Sep, 2018 to 1 Nov, 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 LFUS 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 LFUS. Therefore, SP500 must receive a lower allocation than LFUS in your portfolio. SP500 index usually has shorter drawdown period than LFUS.
On a general note (since you are interested in LFUS), if you are an investor in OPNT, you need to be extra careful (consider limiting your exposure or diversifying) as it is extremely unpredictable and therefore risky.
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