Waiting to invest in MELI? Look for alternatives because it ranked worse than it's peers
14 Dec, 201813 min read
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MERCADOLIBRE INC ranked among the worst performers today. It delivered -2.1% to close at 326.52. It's recent 5 day performance has been -7.71%, +1.72%, +0.49%, +2.01% and -1.14%.
MELI showed a bullish trend over the last 3 months. During this period MELI delivered +1.32% and saw a maximum drawdown of -18.85%. It has been unusually choppy during this period. Long term investors are better off avoiding investing in MELI till volatility reduces and a clear trend emerges.
MELI has been underperforming the SP500 index in recent time. It showed significant outperformance (compared to the SP500 index) from 8 Feb, 2016 to 9 Mar, 2018. Over the last 2 years 11 months and 10 days, MELI outperformed the SP500 index on 53% days.
During the last three months MELI was mostly profitable and delivered on average +0.08% per day. It's best return during this period (of +8.03%) was on Tuesday, 30 Oct, 2018. While it's worst loss in the same period (of -7.71%) was on Thursday, 13 Dec, 2018. The longest stort-term trend during this period was 5 profitable days, which started on 30 Oct, 2018 and went on till 5 Nov, 2018. This bullish trend returned +22.5% to investors.
The last 12 months saw MELI's investors making profits in 5 months and incurring losses in 7 months. MELI was less consistent in delivering monthly returs than SP500 index. MELI significantly outperformed SP500 index in Jan 2018, when it returned +20.0% compared to +4.75% returned by SP500 index during it's best month in the last one year - Jan 2018. MELI had a longer winning streak of losing months than SP500 index. It went down in 3 straight months (from Mar 2018 to May 2018) during which period it delivered -24.69%. It is interesting to note that both MELI and SP500 index significantly outperform during months when quarterly/annual results are announced.
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MELI 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 MELI's volatility from 21 Sep, 2018 to 30 Oct, 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 MELI 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 MELI. Therefore, SP500 must receive a lower allocation than MELI in your portfolio. SP500 index usually has shorter drawdown period than MELI.
Based on your interest in MELI you may find it interesting to know that AMD and LULU are both mid caps that have shown remarkable performance and deserve to be on every investors' watchlist.
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