RALPH LAUREN CORP

103.48 -4.46 (-4.31%) Sell

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

13 min read

RL is a falling knife that can bleed you if you catch it today. On a longer term basis, investors in RALPH LAUREN CORP made +0.02% per day. Thursday's performance of -4.31% was a underperformance compared to it's daily average.

[Themes containing RL]

RL showed a strong bearish trend over the last 3 months. During this period RL delivered -21.45% and saw a maximum drawdown of -24.83%. There was a short signal during this period which returned +18.24%.

Trend

RL has been underperforming the SP500 index in recent time. It showed significant underperformance (compared to the SP500 index) from 3 Feb, 2016 to 26 May, 2017. Over the last 2 years 11 months and 9 days, RL underperformed the SP500 index on 49% days. Which indicates that on days RL underperforms the SP500 index, it's performance is marginally worse than on the days it outperforms the SP500 index.

During the last three months RL delivered profits on 50% days. However, it still managed to end this period in a loss. It's best return during this period (of +4.19%) was on Monday, 15 Oct, 2018. While it's worst loss in the same period (of -8.44%) was on Wednesday, 10 Oct, 2018. The longest stort-term trends during this period were 4 profitable and losing days. The bullish trend (which returned +3.76%) started on 18 Sep, 2018 and went on till 21 Sep, 2018 while the bearish trend (which returned -9.15%) started on 15 Nov, 2018 and went on till 20 Nov, 2018.

The last 12 months saw RL's investors making profits in 6 months and incurring losses in 6 months. RL was less consistent in delivering monthly returs than SP500 index. RL significantly outperformed SP500 index in May 2018, when it returned +22.51% compared to +4.75% returned by SP500 index during it's best month in the last one year - Jan 2018. RL 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 RL and SP500 index significantly outperform during months when quarterly/annual results are announced.

Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years.
-- Warren Buffett

RL 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 RL's volatility from 18 Sep, 2018 to 9 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 RL has significant positive skewness in it's return distribution. This indicates that investors can expect RL to recover from drawdowns quickly. Which makes RL a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.

Investors trading in RL 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 RL. Therefore, SP500 must receive a lower allocation than RL in your portfolio. RL usually has shorter drawdown period than the SP500 index.

On a general note (since you are interested in RL), two large cap instruments that deserve special mention are AMZN and MSFT. They have significantly outperformed the overall market.

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