SNAP investors dump it for better alternatives
07 Dec, 201813 min read
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SNAP INC significantly underperformed on Friday. It lost -2.85% to close at 5.8. On a day when the overall market breadth was 35%, it closed higher than 1% of the market. In comparison, the benchmark SP500 index closed today at -0.0233%.
Buy-and-Hold investors in SNAP experienced a maximum drawdown of -41.35% over the last three months. It lost -40.45% 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 +36.57%.
SNAP has been outperforming the SP500 index in recent time. Over the last 1 year 9 months and 5 days, SNAP underperformed the SP500 index on 54% days.
SNAP returned losses on 62% days in the last three months. During this time, it delivered on average -0.75% per day. It delivered it's worst daily return of -10.16%, during this period, on Friday, 26 Oct, 2018. There was initially a bearish trend during this period which started on 26 Sep, 2018 and went on till 2 Oct, 2018. The trend delivered -9.98% losses to investors. This was followed by a bullish trend that started on 11 Oct, 2018 and ended on 15 Oct, 2018. This bullish trend delivered +11.34% to investors.
SNAP had 2 profitable and 10 loss making months over the last year. During the last year, SNAP underperformed SP500 index on monthly return basis. SNAP significantly outperformed SP500 index in Feb 2018, when it returned +28.11% compared to +4.75% returned by SP500 index during it's best month in the last one year - Jan 2018. SNAP had a longer winning streak of losing months than SP500 index. It went down in 6 straight months (from Jul 2018 to Dec 2018) during which period it delivered -73.29%. It is interesting to note that both SNAP and SP500 index significantly outperform during months when quarterly/annual results are announced.
I'm only rich because I know when I'm wrong..I basically have survived by recognizing my mistakes.
-- George Soros
SNAP 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 SNAP's volatility from 11 Sep, 2018 to 29 Oct, 2018. While there was a significant surge in the SP500 index's volatility from 10 Sep, 2018 to 29 Oct, 2018.
Advanced/professional short-term investors should note that SNAP has significant negative skewness in it's return distribution. This indicates that SNAP is very risky for short-term investment and can significantly underperform for long durations.
Investors trading in SNAP derivatives at this moment can consider 'Protective Collar' options strategy to receive better risk-adjusted returns.
SP500 index has more chance of extreme outcomes than SNAP. Therefore, SP500 must receive a lower allocation than SNAP in your portfolio. SP500 index usually has shorter drawdown period than SNAP.
On a general note (since you are interested in SNAP), two instruments that deserve special mention are I and ECYT. They have significantly outperformed the overall market this year.
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