111.84 -1.02 (-0.91%) Sell

Want to invest in PEP? Avoid as it delivered massive losses

14 min read

PEPSICO INC delivered massive losses today. It returned -0.91% to close at 111.84. It's recent 5 day performance has been -0.95%, -3.72%, +1.15%, -0.25% and +0.95%.

[Themes containing PEP]

PEP showed a down trend over the last 3 months. During this period PEP returned -1.7% and saw a maximum drawdown of -8.82%. It has been unusually choppy during this period. Long term investors are better off avoiding investing in PEP till volatility reduces and a clear trend emerges.


PEP has been outperforming the SP500 index in recent time. Over the last 2 years 11 months and 14 days, PEP underperformed the SP500 index on 46% days. Which indicates that on days PEP underperforms the SP500 index, it's performance is marginally worse than on the days it outperforms the SP500 index.

During the last three months PEP was mostly loss making and delivered on average -0.02% per day. It's best return during this period (of +3.1%) was on Friday, 30 Nov, 2018. While it's worst loss in the same period (of -3.72%) was on Friday, 14 Dec, 2018. There was initially a bearish trend during this period which started on 21 Sep, 2018 and went on till 27 Sep, 2018. The trend delivered -3.66% losses to investors. This was followed by a bullish trend that started on 5 Nov, 2018 and ended on 9 Nov, 2018. This bullish trend delivered +5.58% to investors.

On monthly basis, PEP delivered losses in more months over the last year, than profits. PEP delivered profits less regularly than SP500 index. PEP was also a more risky investment than SP500 index as it's worst month in the last year, Feb 2018, returned -8.79% compared to -7.75% returned by SP500 index in Dec 2018. PEP had a longer winning streak of losing months than SP500 index. It went down in 4 straight months (from Feb 2018 to May 2018) during which period it delivered -15.71%. It is interesting to note that both PEP and SP500 index significantly outperform during months when quarterly/annual results are announced.

"There are two kinds of investors, be they large or small: those who don't know where the market is headed, and those who don't know that they don't know. Then again, there is a third type of investor -the investment professional, who indeed knows that he or she doesn't know, but whose livelihood depends upon appearing to know.

PEP 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 PEP's volatility from 19 Sep, 2018 to 6 Dec, 2018. While there was a significant surge in the SP500 index's volatility from 19 Sep, 2018 to 29 Oct, 2018.

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

Investors trading in PEP derivatives at this moment can consider 'Calendar Spread' options strategy to receive better risk-adjusted returns.

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

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

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