15.85 +0.09 (+0.57%) Sell

SGMS does a dead cat bounce, it's still too early to buy into it

13 min read

SGMS was among the best performers today. On a longer term basis, investors in SCIENTIFIC GAMES CORP made -0.02% per day. Friday's performance of +0.57% was a significant outperformance compared to it's daily average.

[Themes containing SGMS]

Buy-and-Hold investors in SGMS experienced a maximum drawdown of -41.41% over the last three months. It returned -36.35% during this strong down 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 +7.83%.


SGMS has been underperforming the SP500 index in recent time, after having outperformed till 21 May, 2018. Over the last 2 years 11 months and 10 days, SGMS outperformed the SP500 index on 50% days. Which indicates that on days SGMS outperforms the SP500 index, it's performance is marginally better than on the days it underperforms the SP500 index.

During the last three months SGMS was mostly loss making and delivered on average -0.52% per day. It's best return during this period (of +25.42%) was on Thursday, 8 Nov, 2018. While it's worst loss in the same period (of -17.05%) was on Friday, 9 Nov, 2018. There was initially a bearish trend during this period which started on 18 Oct, 2018 and went on till 24 Oct, 2018. The trend delivered -16.03% losses to investors. This was followed by a bullish trend that started on 30 Oct, 2018 and ended on 1 Nov, 2018. This bullish trend delivered +21.66% to investors.

On monthly basis, SGMS delivered losses in more months over the last year, than profits. SGMS delivered profits less regularly than SP500 index. SGMS was also a more risky investment than SP500 index as it's worst month in the last year, Aug 2018, returned -36.94% compared to -7.28% returned by SP500 index in Oct 2018. SGMS had a longer winning streak of losing months than SP500 index. It went down in 7 straight months (from Jun 2018 to Dec 2018) during which period it delivered -113.36%. It is interesting to note that both SGMS and SP500 index significantly outperform during months when quarterly/annual results are announced.

"Buy not on optimism, but on arithmetic.

SGMS is becoming more volatile overall. In comparison, the SP500 index is seeing a rise in volatility. During the last three months, there was a significant fall in SGMS's volatility from 17 Sep, 2018 to 2 Oct, 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 SGMS 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 SGMS. Therefore, SP500 must receive a lower allocation than SGMS in your portfolio. SP500 index usually has shorter drawdown period than SGMS.

On a general note (since you are interested in SGMS), two instruments that have been extremely volatile in recent times are IX and VIPS. Investors in these instruments should consider reducing their exposure (to IX and VIPS) and diversifying their portfolios.

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