13.24 -0.02 (-0.15%) Sell

Search for alternative investments is on for NMFC investors as it underperforms broader market

13 min read

NEW MOUNTAIN FINANCE CORP trailed the broader market today. It returned -0.15% to close at 13.24. It's recent 5 day performance has been -1.27%, -1.83%, +0.51%, -0.15% and +0.07%.

[Themes containing NMFC]

NMFC is currently in a down trend. Over the last three months trading short signals has not been a profitable strategy for NMFC's investors in general. However, this strategy had significantly lower risk when compared to Buy-and-Hold investing (which returned -4.06%). It is therefore better to tread with caution in the current downtrend by limiting your allocation to NMFC.


NMFC has been outperforming the SP500 index in recent time. Over the last 2 years 11 months and 3 days, NMFC underperformed the SP500 index on 50% days. Which indicates that on days NMFC underperforms the SP500 index, it's performance is marginally worse than on the days it outperforms the SP500 index.

During the last three months NMFC was mostly loss making and delivered on average -0.06% per day. It's best return during this period (of +2.44%) was on Monday, 1 Oct, 2018. While it's worst loss in the same period (of -2.06%) was on Wednesday, 10 Oct, 2018. There was initially a bearish trend during this period which started on 17 Oct, 2018 and went on till 24 Oct, 2018. The trend delivered -2.98% losses to investors. This was followed by a bullish trend that started on 21 Nov, 2018 and ended on 29 Nov, 2018. This bullish trend delivered +2.83% to investors.

On monthly basis, NMFC delivered losses in more months over the last year, than profits. NMFC delivered profits less regularly than SP500 index. NMFC was also a less risky investment than SP500 index as it's worst month in the last year, Feb 2018, returned -4.89% compared to -7.28% returned by SP500 index in Oct 2018. NMFC 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 NMFC and SP500 index significantly outperform during months when quarterly/annual results are announced.

It is time for us to stand and cheer for the doer, the achiever, the one who recognizes the challenge and does something about it.
-- Vince Lombardi

NMFC 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 fall in NMFC's volatility from 10 Sep, 2018 to 3 Dec, 2018. While there was a significant surge in the SP500 index's volatility from 10 Sep, 2018 to 29 Oct, 2018.

Advanced/professional short-term investors should note that NMFC has significant positive skewness in it's return distribution. This indicates that investors can expect NMFC to recover from drawdowns quickly. Which makes NMFC a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.

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

On a general note (since you are interested in NMFC), three mid cap instruments that deserve special mention are LULU, AMD and SQ. They have all outperformed the market and must be closely watched for investment opportunities.

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