Waiting to invest in PLUS? Avoid at the moment as it is a falling knife that can bleed you if you catch it
13 Dec, 201813 min read
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PLUS is a falling knife that can bleed you if you catch it today. On a longer term basis, investors in EPLUS INC made -0.07% per day. Thursday's performance of -1.81% was a underperformance compared to it's daily average.
PLUS showed a strong bearish trend over the last 3 months. During this period PLUS delivered -27.37% and saw a maximum drawdown of -27.37%. There was a short signal during this period which returned +22.0%.
PLUS has been underperforming the SP500 index in recent time. It showed significant outperformance (compared to the SP500 index) from 2 Aug, 2016 to 7 Aug, 2018. Over the last 2 years 11 months and 9 days, PLUS outperformed the SP500 index on 54% days.
During the last three months PLUS was mostly loss making and delivered on average -0.49% per day. It's best return during this period (of +4.16%) was on Wednesday, 28 Nov, 2018. While it's worst loss in the same period (of -7.3%) was on Thursday, 8 Nov, 2018. The longest stort-term trend during this period was 5 losing days, which started on 4 Oct, 2018 and ended on 10 Oct, 2018. This bearish trend lost -5.36% of investor capital.
The last 12 months saw PLUS's investors making profits in 7 months and incurring losses in 5 months. PLUS was less consistent in delivering monthly returs than SP500 index. PLUS significantly outperformed SP500 index in May 2018, when it returned +13.9% compared to +4.75% returned by SP500 index during it's best month in the last one year - Jan 2018. PLUS and SP500 index, both had periods of 6 consecutive profitable months. It is interesting to note that both PLUS and SP500 index significantly outperform during months when quarterly/annual results are announced.
I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.
-- Warren Buffett
PLUS is currently seeing overall increase in volatility. In comparison, the SP500 index is seeing increase in volatility. During the last three months, there was a significant surge in PLUS's volatility from 14 Sep, 2018 to 8 Nov, 2018. While there was a significant surge in the SP500 index's volatility from 14 Sep, 2018 to 29 Oct, 2018.
Advanced/professional short-term investors should note that PLUS has significant positive skewness in it's return distribution. This indicates that investors can expect PLUS to recover from drawdowns quickly. Which makes PLUS 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 PLUS. Therefore, SP500 must receive a lower allocation than PLUS in your portfolio. SP500 index usually has shorter drawdown period than PLUS.
On a general note (since you are interested in PLUS), three instruments that deserve special mention are I, ECYT and TNDM. They have all outperformed the market and must be closely watched for investment opportunities.
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