SCI is a falling knife, continues to bleed every investor trying to catch it
13 Dec, 201813 min read
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SERVICE CORP INTERNATIONAL is a falling knife that can bleed you if you catch it on Thursday. It delivered -1.39% to close at 44.13. It is currently trading +25% above it's 52 week low of 35.3 and is down only -6% from it's 52 week high.
SCI showed a bullish trend over the last 3 months. During this period SCI delivered +3.81% and saw a maximum drawdown of -7.74%. It has been unusually choppy during this period. Long term investors are better off avoiding investing in SCI till volatility reduces and a clear trend emerges.
SCI has been outperforming the SP500 index in recent time. It showed significant outperformance (compared to the SP500 index) from 28 Mar, 2016 to 6 Dec, 2018. Over the last 2 years 11 months and 9 days, SCI outperformed the SP500 index on 53% days.
During the last three months SCI was mostly profitable and delivered on average +0.07% per day. It's best return during this period (of +3.38%) was on Wednesday, 28 Nov, 2018. While it's worst loss in the same period (of -3.82%) was on Tuesday, 30 Oct, 2018. The longest stort-term trends during this period were 5 profitable and losing days. The bullish trend (which returned +3.33%) started on 17 Sep, 2018 and went on till 21 Sep, 2018 while the bearish trend (which returned -2.24%) started on 8 Nov, 2018 and went on till 14 Nov, 2018.
The last 12 months saw SCI's investors making profits in 7 months and incurring losses in 5 months. SCI was less consistent in delivering monthly returs than SP500 index. SCI significantly outperformed SP500 index in Nov 2018, when it returned +11.41% compared to +4.75% returned by SP500 index during it's best month in the last one year - Jan 2018. SCI 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 SCI and SP500 index significantly outperform during months when quarterly/annual results are announced.
Don't always trust what you see. In a bull market even a duck looks like a swan.
-- Vijay Kedia
SCI 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 SCI's volatility from 21 Sep, 2018 to 1 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 SCI 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 SCI. Therefore, SP500 must receive a lower allocation than SCI in your portfolio. SP500 index usually has shorter drawdown period than SCI.
On a general note (since you are interested in SCI), if you are an investor in NVCN, you need to be extra careful (consider limiting your exposure or diversifying) as it is extremely unpredictable and therefore risky.
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