MTG is a falling knife, continues to bleed every investor trying to catch it
13 Dec, 201813 min read
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MGIC INVESTMENT CORP was among the worst performers on Thursday. It returned -3.25% to close at 10.42. On a day when the overall market breadth was 35%, it closed higher than 5% of the market. In comparison, the benchmark SP500 index closed today at -0.0002%.
MTG showed a strong down trend over the last 3 months. During this period MTG returned -19.1% and saw a maximum drawdown of -21.71%. There was a short signal during this period which returned +17.95%.
MTG has been underperforming the SP500 index in recent time, after having outperformed till 6 Dec, 2017. Over the last 2 years 11 months and 9 days, MTG underperformed the SP500 index on 47% days. Which indicates that on days MTG underperforms the SP500 index, it's performance is marginally worse than on the days it outperforms the SP500 index.
During the last three months MTG delivered profits on 51% days. However, it still managed to end this period in a loss. It's best return during this period (of +3.35%) was on Tuesday, 16 Oct, 2018. While it's worst loss in the same period (of -6.59%) was on Tuesday, 4 Dec, 2018. There was initially a bullish trend during this period which started on 17 Sep, 2018 and went on till 21 Sep, 2018. The bullish trend returned +1.7% to investors. This was followed by a bearish trend that started on 18 Oct, 2018 and ended on 24 Oct, 2018. This bearish trend lost -12.88% of investor capital.
On monthly basis, MTG delivered profits and losses in equal number of months. MTG delivered profits less regularly than SP500 index. MTG was also a more risky investment than SP500 index as it's worst month in the last year, Apr 2018, returned -21.6% compared to -7.28% returned by SP500 index in Oct 2018. MTG had a shorter streak of profitable months than SP500 index. It only went up in 5 straight months during the last year.
"Money is like manure. You have to spread it around or it smells.
MTG is becoming more volatile overall. In comparison, the SP500 index is seeing a rise in volatility. During the last three months, there was a significant surge in MTG's volatility from 21 Sep, 2018 to 13 Dec, 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 MTG 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 MTG. Therefore, SP500 must receive a lower allocation than MTG in your portfolio. SP500 index usually has shorter drawdown period than MTG.
Based on your interest in MTG you may find it interesting to know that PFE is a large cap that has shown remarkable performance and deserves to be on every investors' watchlist.
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