31.83 -0.3 (-0.93%) Sell

Doubt in the minds of RBA investors as it significantly underperforms

13 min read

RITCHIE BROS AUCTIONEERS INC delivered massive losses on Monday. It fell by -0.93% to close at 31.83. It is currently trading -17% below it's 52 week high of 38.53.

[Themes containing RBA]

Buy-and-Hold investors in RBA experienced a maximum drawdown of -15.43% over the last three months. It fell by -15.17% during this strong 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 +14.16%.


RBA has been underperforming the SP500 index in recent time. It showed significant underperformance (compared to the SP500 index) from 7 Dec, 2016 to 15 Nov, 2017. Over the last 2 years 11 months and 10 days, RBA outperformed the SP500 index on 51% days.

RBA returned losses on 64% days in the last three months. During this time, it delivered on average -0.25% per day. It delivered it's best daily return of +5.65%, during this period, on Friday, 9 Nov, 2018. The longest stort-term trend during this period was 6 losing days, which started on 17 Oct, 2018 and ended on 24 Oct, 2018. This bearish trend lost -5.54% of investor capital.

During the last year RBA had 6 profitable months and 6 loss making months. RBA returned profits in fewer months than SP500 index. RBA significantly outperformed SP500 index in Aug 2018, when it returned +14.55% compared to +4.75% returned by SP500 index during it's best month in the last one year - Jan 2018. RBA 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 RBA and SP500 index significantly outperform during months when quarterly/annual results are announced.

Money is a terrible master but an excellent servant.
-- P.T. Barnum

RBA 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 RBA's volatility from 18 Sep, 2018 to 9 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 RBA has negative skewness in it's return distribution. This indicates that investors may need to stay invested through long periods of drawdown before expecting a recovery.

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

On a general note (since you are interested in RBA), three instruments that have performed similar to RBA are AEL, DHI and SFL. They must all be evaluated as alternative investment options and for diversification.

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