Don't invest in LRCX now, it is an investor's nightmare
14 Dec, 201813 min read
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LAM RESEARCH CORP is a falling knife that can bleed you if you catch it today. It delivered -2.44% to close at 135.37. It's recent 5 day performance has been +0.22%, +0.12%, +0.34%, -0.15% and -5.28%.
LRCX showed a strong bearish trend over the last 3 months. During this period LRCX delivered -11.0% and saw a maximum drawdown of -15.93%. There were 2 short signals during this period that returned a cumulative of +2.08% to investors.
LRCX has been underperforming the SP500 index in recent time. It showed significant outperformance (compared to the SP500 index) from 11 Feb, 2016 to 12 Mar, 2018. Over the last 2 years 11 months and 10 days, LRCX outperformed the SP500 index on 56% days.
During the last three months LRCX was mostly loss making and delivered on average -0.16% per day. It's best return during this period (of +7.15%) was on Thursday, 1 Nov, 2018. While it's worst loss in the same period (of -7.04%) was on Tuesday, 4 Dec, 2018. The longest stort-term trend during this period was 6 losing days, which started on 4 Oct, 2018 and ended on 11 Oct, 2018. This bearish trend lost -9.95% of investor capital.
The last 12 months saw LRCX's investors making profits in 6 months and incurring losses in 6 months. LRCX was less consistent in delivering monthly returs than SP500 index. LRCX was also a more risky investment than SP500 index as it's worst month in the last year, Dec 2018, returned -13.76% compared to -7.28% returned by SP500 index in Oct 2018. LRCX had a shorter streak of profitable months than SP500 index. It only went up in 3 straight months during the last year. It is interesting to note that both LRCX and SP500 index significantly outperform during months when quarterly/annual results are announced.
I'm a great believer in luck, and I find the harder I work the more I have of it.
-- Thomas Jefferson
LRCX is currently seeing overall fall in volatility. In comparison, the SP500 index is seeing increase in volatility. During the last three months, there was a significant surge in LRCX's volatility from 17 Sep, 2018 to 20 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 LRCX has significant positive skewness in it's return distribution. This indicates that investors can expect LRCX to recover from drawdowns quickly. Which makes LRCX a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.
Investors trading in LRCX derivatives at this moment can consider 'Protective Collar' options strategy to receive better risk-adjusted returns.
SP500 index has more chance of extreme outcomes than LRCX. Therefore, SP500 must receive a lower allocation than LRCX in your portfolio. SP500 index usually has shorter drawdown period than LRCX.
Based on your interest in LRCX you may find it interesting to know that AMZN, MSFT and V are large caps that have all shown remarkable performance and qualify to be on every investor's watchlist.
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