6.71 -0.07 (-1.03%) Sell

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

13 min read

LSB INDUSTRIES INC was among the worst performers today. It delivered -1.03% to close at 6.71. During the last week it delivered -8.21% and saw a maximum drawdown of -8.21%.

[Themes containing LXU]

Buy-and-Hold investors in LXU experienced a maximum drawdown of -32.15% over the last three months. It delivered -25.61% during this strong bearish trending period. There were both Long and Short signals during this period, where the short signals were significantly more profitable than the long signals. The net profit from Short signals was +29.29%.


LXU has been underperforming the SP500 index in recent time. It showed significant underperformance (compared to the SP500 index) from 8 Jun, 2016 to 12 Jun, 2018. Over the last 2 years 11 months and 7 days, LXU underperformed the SP500 index on 51% days.

During the last three months LXU was mostly loss making and delivered on average -0.44% per day. It's best return during this period (of +5.59%) was on Wednesday, 7 Nov, 2018. While it's worst loss in the same period (of -8.14%) was on Wednesday, 14 Nov, 2018. The longest stort-term trends during this period were 5 profitable and losing days. The bullish trend (which returned +8.93%) started on 13 Sep, 2018 and went on till 19 Sep, 2018 while the bearish trend (which returned -15.5%) started on 23 Oct, 2018 and went on till 29 Oct, 2018.

The last 12 months saw LXU's investors making profits in 5 months and incurring losses in 7 months. LXU was less consistent in delivering monthly returs than SP500 index. LXU significantly outperformed SP500 index in Aug 2018, when it returned +32.72% compared to +4.75% returned by SP500 index during it's best month in the last one year - Jan 2018. LXU 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 -50.11%.

Risk comes from not knowing what you're doing.
-- Warren Buffett

LXU 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 LXU's volatility from 14 Sep, 2018 to 14 Nov, 2018. While there was a significant surge in the SP500 index's volatility from 13 Sep, 2018 to 29 Oct, 2018.

Advanced/professional short-term investors should note that LXU has positive skewness in it's return distribution. This indicates that investors can expect LXU to make attempts to recover from drawdowns quickly. Which makes LXU a good candidate for momentum based trading on short-term bullish trends or counter-trends.

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

On a general note (since you are interested in LXU), two instruments that have been extremely volatile in recent times are VIPS and NVCN. Investors in these instruments should consider reducing their exposure (to VIPS and NVCN) and diversifying their portfolios.

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