PLAINS ALL AMERICAN PIPELINE LP

23.09 -0.2 (-0.86%) Sell

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

13 min read

PLAINS ALL AMERICAN PIPELINE LP was among the worst performers on Friday. It fell by -0.86% to close at 23.09. On a day when the overall market breadth was 35%, it closed higher than 79% of the market. In comparison, the benchmark SP500 index closed today at -0.0191%.

[Themes containing PAA]

Buy-and-Hold investors in PAA experienced a maximum drawdown of -19.17% over the last three months. It fell by -8.15% during this 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 +3.55%.

Trend

PAA has been outperforming the SP500 index in recent time. It showed significant underperformance (compared to the SP500 index) from 19 Oct, 2016 to 29 Nov, 2017. Over the last 2 years 11 months and 10 days, PAA underperformed the SP500 index on 52% days.

During the last three months PAA was mostly loss making and delivered on average -0.11% per day. It's best return during this period (of +4.82%) was on Thursday, 1 Nov, 2018. While it's worst loss in the same period (of -5.25%) was on Wednesday, 24 Oct, 2018. The longest stort-term trends during this period were 6 profitable and losing days. The bullish trend (which returned +10.14%) started on 26 Nov, 2018 and went on till 3 Dec, 2018 while the bearish trend (which returned -12.01%) started on 17 Oct, 2018 and went on till 24 Oct, 2018.

During the last year PAA had 8 profitable months and 4 loss making months. Profitable number of months of PAA and SP500 index were the same. PAA was also a more risky investment than SP500 index as it's worst month in the last year, Oct 2018, returned -14.79% compared to -7.28% returned by SP500 index in Oct 2018. PAA 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 PAA and SP500 index significantly outperform during months when quarterly/annual results are announced.

"You have venture capitalists. We view them as experts who also help finance your company and give directions and also some pretty candid discussions about what you have to do better.

PAA 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 PAA's volatility from 17 Sep, 2018 to 7 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 PAA has significant positive skewness in it's return distribution. This indicates that investors can expect PAA to recover from drawdowns quickly. Which makes PAA a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.

Investors trading in PAA derivatives at this moment can consider 'Covered Call' options strategy to receive better risk-adjusted returns.

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

Based on your interest in PAA you may find it interesting to know that V and UNH are both large caps that have shown remarkable performance and deserve to be on every investors' watchlist.

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