M investors herd to book profits while the going is good
14 Dec, 201813 min read
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MACY'S, INC. ranked among the worst performers on Friday. It lost -0.62% to close at 30.61. On a day when the overall market breadth was 35%, it closed higher than 67% of the market. In comparison, the benchmark SP500 index closed today at -0.0191%.
M is currently in a up trend. Over the last three months Buy-and-Hold has been a better strategy (returning -12.94%) for M's investors than trading long signals.
M has been underperforming the SP500 index in recent time, after having outperformed till 4 Mar, 2016. Over the last 2 years 11 months and 10 days, M underperformed the SP500 index on 47% days. Which indicates that on days M underperforms the SP500 index, it's performance is marginally worse than on the days it outperforms the SP500 index.
During the last three months M was mostly loss making and delivered on average -0.19% per day. It's best return during this period (of +5.12%) was on Tuesday, 30 Oct, 2018. While it's worst loss in the same period (of -7.18%) was on Wednesday, 14 Nov, 2018. There was initially a bullish trend during this period which started on 1 Nov, 2018 and went on till 8 Nov, 2018. The bullish trend returned +9.82% to investors. This was followed by a bearish trend that started on 9 Nov, 2018 and ended on 15 Nov, 2018. This bearish trend lost -15.4% of investor capital.
M had 6 profitable and 6 loss making months over the last year. During the last year, M underperformed SP500 index on monthly return basis. M significantly outperformed SP500 index in Feb 2018, when it returned +13.33% compared to +4.75% returned by SP500 index during it's best month in the last one year - Jan 2018. M and SP500 index, both had periods of 6 consecutive profitable months. It is interesting to note that both M and SP500 index significantly outperform during months when quarterly/annual results are announced.
Money never made a man happy yet, nor will it. The more a man has, the more he wants. Instead of filling a vacuum, it makes one.
-- Benjamin Franklin
M is becoming less volatile overall. In comparison, the SP500 index is seeing a rise in volatility. During the last three months, there was a significant surge in M's volatility from 19 Sep, 2018 to 16 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 M has significant positive skewness in it's return distribution. This indicates that investors can expect M to recover from drawdowns quickly. Which makes M a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.
Investors trading in M derivatives at this moment can consider 'Bear Put Spread' options strategy to receive better risk-adjusted returns.
SP500 index has more chance of extreme outcomes than M. Therefore, SP500 must receive a lower allocation than M in your portfolio. M usually has shorter drawdown period than the SP500 index.
On a general note (since you are interested in M), ZBRA is a small cap that deserves to be closely tracked for investment opportunities.
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