Are you evaluating investing in SPWR? Wait as it showed weakness
07 Dec, 201813 min read
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SUNPOWER CORP delivered massive losses on Friday. It lost -2.68% to close at 6.54. On a day when the overall market breadth was 35%, it closed higher than 80% of the market. In comparison, the benchmark SP500 index closed today at -0.0233%.
SPWR showed a up trend over the last 3 months. During this period SPWR gained +1.24% and saw a maximum drawdown of -26.39%. It has been unusually choppy during this period. Long term investors are better off avoiding investing in SPWR till volatility reduces and a clear trend emerges.
SPWR has been outperforming the SP500 index in recent time. Over the last 2 years 11 months and 3 days, SPWR underperformed the SP500 index on 52% days.
SPWR returned losses on 61% days in the last three months. During this time, it delivered on average +0.1% per day. It delivered it's best daily return of +16.34%, during this period, on Monday, 26 Nov, 2018. There was initially a bearish trend during this period which started on 21 Sep, 2018 and went on till 1 Oct, 2018. The trend delivered -12.53% losses to investors. This was followed by a bullish trend that started on 21 Nov, 2018 and ended on 28 Nov, 2018. This bullish trend delivered +21.16% to investors.
SPWR had 4 profitable and 8 loss making months over the last year. During the last year, SPWR underperformed SP500 index on monthly return basis. SPWR was also a more risky investment than SP500 index as it's worst month in the last year, Oct 2018, returned -15.47% compared to -7.28% returned by SP500 index in Oct 2018. SPWR had a longer winning streak of losing months than SP500 index. It went down in 4 straight months (from May 2018 to Aug 2018) during which period it delivered -27.47%.
Opportunity is missed by most people because it is dressed in overalls and looks like work.
-- Thomas Edison
SPWR 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 SPWR's volatility from 10 Sep, 2018 to 18 Sep, 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 SPWR has significant negative skewness in it's return distribution. This indicates that SPWR is very risky for short-term investment and can significantly underperform for long durations.
Investors trading in SPWR 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 SPWR. Therefore, SP500 must receive a lower allocation than SPWR in your portfolio. SP500 index usually has shorter drawdown period than SPWR.
On a general note (since you are interested in SPWR), three instruments that deserve special mention are NIHD, HEAR and ECYT. They have all outperformed the market and must be closely watched for investment opportunities.
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