36.54 -1.12 (-3.08%) Sell

Don't invest in SCSC now, it is a risky investment

13 min read

SCANSOURCE, INC. was among the worst performers on Friday. It lost -3.08% to close at 36.54. On a day when the overall market breadth was 35%, it closed higher than 18% of the market. In comparison, the benchmark SP500 index closed today at -0.0191%.

[Themes containing SCSC]

SCSC showed a down trend over the last 3 months. During this period SCSC lost -8.08% and saw a maximum drawdown of -13.54%. It has been unusually choppy during this period. Long term investors are better off avoiding investing in SCSC till volatility reduces and a clear trend emerges.


SCSC has been underperforming the SP500 index in recent time, after having outperformed till 27 Apr, 2016. Over the last 2 years 11 months and 10 days, SCSC underperformed the SP500 index on 50% days. Which indicates that on days SCSC underperforms the SP500 index, it's performance is marginally worse than on the days it outperforms the SP500 index.

During the last three months SCSC was mostly loss making and delivered on average -0.11% per day. It's best return during this period (of +4.55%) was on Thursday, 1 Nov, 2018. While it's worst loss in the same period (of -5.21%) was on Tuesday, 4 Dec, 2018. There was initially a bearish trend during this period which started on 27 Sep, 2018 and went on till 2 Oct, 2018. The trend delivered -7.53% losses to investors. This was followed by a bullish trend that started on 30 Oct, 2018 and ended on 6 Nov, 2018. This bullish trend delivered +11.35% to investors.

SCSC had 5 profitable and 7 loss making months over the last year. During the last year, SCSC underperformed SP500 index on monthly return basis. SCSC significantly outperformed SP500 index in May 2018, when it returned +14.14% compared to +4.75% returned by SP500 index during it's best month in the last one year - Jan 2018. SCSC 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 SCSC and SP500 index significantly outperform during months when quarterly/annual results are announced.

Money won't create success, the freedom to make it will.
-- Nelson Mandela

SCSC is becoming less volatile overall. In comparison, the SP500 index is seeing a rise in volatility. During the last three months, there was a significant surge in SCSC's volatility from 17 Sep, 2018 to 12 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 SCSC has significant positive skewness in it's return distribution. This indicates that investors can expect SCSC to recover from drawdowns quickly. Which makes SCSC 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 SCSC. Therefore, SP500 must receive a lower allocation than SCSC in your portfolio. SCSC usually has shorter drawdown period than the SP500 index.

On a general note (since you are interested in SCSC), AAXN is a small cap that deserves to be closely tracked for investment opportunities.

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