Looking to invest in LQDT? Look for alternatives because it performed worse than the broader market
18 Dec, 201813 min read
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LIQUIDITY SERVICES INC was among the worst performers on Tuesday. It fell by -1.4% to close at 7.02. On a day when the overall market breadth was 34%, it closed higher than 89% of the market. In comparison, the benchmark SP500 index closed today at +0.01%.
LQDT showed a strong bullish trend over the last 3 months. During this period LQDT delivered +16.03% and saw a maximum drawdown of -18.91%. It has been unusually choppy during this period. Long term investors are better off avoiding investing in LQDT till volatility reduces and a clear trend emerges.
LQDT has been outperforming the SP500 index in recent time. It showed significant underperformance (compared to the SP500 index) from 30 Sep, 2016 to 24 Jan, 2018. Over the last 2 years 11 months and 14 days, LQDT underperformed the SP500 index on 49% days. Which indicates that on days LQDT underperforms the SP500 index, it's performance is marginally worse than on the days it outperforms the SP500 index.
During the last three months LQDT was mostly profitable and delivered on average +0.31% per day. It's best return during this period (of +18.99%) was on Thursday, 6 Dec, 2018. While it's worst loss in the same period (of -6.77%) was on Monday, 1 Oct, 2018. The longest stort-term trend during this period was 6 profitable days, which started on 1 Nov, 2018 and went on till 8 Nov, 2018. This bullish trend returned +7.37% to investors.
During the last year LQDT had 9 profitable months and 3 loss making months. LQDT returned profits in more months than SP500 index. LQDT significantly outperformed SP500 index in Feb 2018, when it returned +42.71% compared to +4.75% returned by SP500 index during it's best month in the last one year - Jan 2018. LQDT had a shorter streak of profitable months than SP500 index. It only went up in 3 straight months during the last year.
Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver.
-- Ayn Rand
LQDT 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 LQDT's volatility from 20 Sep, 2018 to 8 Oct, 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 LQDT 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 LQDT. Therefore, SP500 must receive a lower allocation than LQDT in your portfolio. SP500 index usually has shorter drawdown period than LQDT.
Based on your interest in LQDT you may find it interesting to know that MZOR, PRPL and HHS have all performed similar to LQDT and qualify as alternative investment candidates that must be evaluated for diversification.
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