27.05 -0.02 (-0.07%) Buy

TAL investors not showing any loss of confidence as it pauses to catch its breath

13 min read

TAL EDUCATION GROUP (Foreign) ranked worse than it's peers on Friday. It lost -0.07% to close at 27.05. On a day when the overall market breadth was 35%, it closed higher than 90% of the market. In comparison, the benchmark SP500 index closed today at -0.0191%.

[Themes containing TAL]

TAL showed a up trend over the last 3 months. During this period TAL gained +8.24% and saw a maximum drawdown of -20.5%. It has been unusually choppy during this period. Long term investors are better off avoiding investing in TAL till volatility reduces and a clear trend emerges.


TAL has been underperforming the SP500 index in recent time, after having outperformed till 8 Jun, 2018. Over the last 2 years 11 months and 10 days, TAL outperformed the SP500 index on 54% days.

TAL returned losses on 56% days in the last three months. During this time, it delivered on average +0.19% per day. It delivered it's best daily return of +14.25%, during this period, on Thursday, 25 Oct, 2018. There was initially a bullish trend during this period which started on 17 Sep, 2018 and went on till 21 Sep, 2018. The bullish trend returned +7.77% to investors. This was followed by a bearish trend that started on 1 Oct, 2018 and ended on 8 Oct, 2018. This bearish trend lost -12.11% of investor capital.

TAL had 5 profitable and 7 loss making months over the last year. During the last year, TAL underperformed SP500 index on monthly return basis. TAL significantly outperformed SP500 index in May 2018, when it returned +16.58% compared to +4.75% returned by SP500 index during it's best month in the last one year - Jan 2018. TAL had a longer winning streak of losing months than SP500 index. It went down in 4 straight months (from Jun 2018 to Sep 2018) during which period it delivered -49.62%. It is interesting to note that both TAL and SP500 index significantly outperform during months when quarterly/annual results are announced.

A successful man is one who can lay a firm foundation with the bricks others have thrown at him.
-- David Brinkley

TAL 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 surge in TAL's volatility from 17 Sep, 2018 to 26 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 TAL has significant positive skewness in it's return distribution. This indicates that investors can expect TAL to recover from drawdowns quickly. Which makes TAL 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 TAL. Therefore, SP500 must receive a lower allocation than TAL in your portfolio. SP500 index usually has shorter drawdown period than TAL.

On a general note (since you are interested in TAL), two small cap instruments that deserve special mention are EHC and KEYS. They have significantly outperformed the overall market.

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