Don't even consider investing in PLUG now, it is a volatile investment
07 Dec, 201813 min read
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PLUG has destroyed investor wealth today. On a longer term basis, investors in PLUG POWER INC made +0.29% per day. Friday's performance of -3.09% was a significant underperformance compared to it's daily average.
PLUG showed a strong down trend over the last 3 months. During this period PLUG lost -14.21% and saw a maximum drawdown of -20.3%. There were 3 short signals during this period that returned a cumulative of +1.31% to investors.
PLUG has been underperforming the SP500 index in recent time, after having outperformed till 6 Nov, 2017. Over the last 2 years 11 months and 3 days, PLUG underperformed the SP500 index on 55% days.
During the last three months PLUG was mostly loss making and delivered on average -0.22% per day. It's best return during this period (of +6.86%) was on Friday, 14 Sep, 2018. While it's worst loss in the same period (of -6.72%) was on Wednesday, 10 Oct, 2018. There was initially a bullish trend during this period which started on 11 Oct, 2018 and went on till 17 Oct, 2018. The bullish trend returned +10.81% to investors. This was followed by a bearish trend that started on 22 Oct, 2018 and ended on 29 Oct, 2018. This bearish trend lost -7.42% of investor capital.
PLUG had 4 profitable and 8 loss making months over the last year. During the last year, PLUG underperformed SP500 index on monthly return basis. PLUG was also a more risky investment than SP500 index as it's worst month in the last year, Jan 2018, returned -20.25% compared to -7.28% returned by SP500 index in Oct 2018. PLUG had a longer winning streak of losing months than SP500 index. It went down in 6 straight months (from Jul 2018 to Dec 2018) during which period it delivered -25.37%.
"Everything is always feasible if you run a corporate finance exercise: you can always try to come out with a justification on how things could work. But the real issue is to say how do you translate that into practice.
PLUG 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 PLUG's volatility from 11 Sep, 2018 to 8 Oct, 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 PLUG has significant negative skewness in it's return distribution. This indicates that PLUG is very risky for short-term investment and can significantly underperform for long durations.
Investors trading in PLUG derivatives at this moment can consider 'Bear Put Spread' options strategy to receive better risk-adjusted returns.
SP500 index has more chance of extreme outcomes than PLUG. Therefore, SP500 must receive a lower allocation than PLUG in your portfolio. SP500 index usually has shorter drawdown period than PLUG.
On a general note (since you are interested in PLUG), three large cap instruments that deserve special mention are V, CSCO and AMZN. They have all outperformed the market and must be closely watched for investment opportunities.
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