88.34 -2.14 (-2.42%) Sell

TARO is a falling knife, continues to bleed every investor trying to catch it

13 min read

TARO PHARMACEUTICAL INDUSTRIES LTD (Foreign) is a falling knife that can bleed you if you catch it on Friday. It returned -2.42% to close at 88.34 which is it's 52 week low, down -26% from it's 52 week high.

[Themes containing TARO]

TARO is currently in a down trend. Over the last three months 2 bearish signals have generated a profit of +1.05% for investors.


TARO has been underperforming the SP500 index in recent time, after having outperformed till 7 Jan, 2016. Over the last 2 years 11 months and 10 days, TARO underperformed the SP500 index on 51% days.

TARO returned losses on 53% days in the last three months. During this time, it delivered on average -0.17% per day. It delivered it's worst daily return of -11.52%, during this period, on Monday, 10 Dec, 2018. There was initially a bullish trend during this period which started on 27 Sep, 2018 and went on till 3 Oct, 2018. The bullish trend returned +1.87% to investors. This was followed by a bearish trend that started on 9 Nov, 2018 and ended on 16 Nov, 2018. This bearish trend lost -4.7% of investor capital.

On monthly basis, TARO delivered losses in more months over the last year, than profits. TARO delivered profits less regularly than SP500 index. TARO was also a more risky investment than SP500 index as it's worst month in the last year, Dec 2018, returned -18.14% compared to -7.28% returned by SP500 index in Oct 2018. TARO 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 -17.19%. It is interesting to note that both TARO and SP500 index significantly outperform during months when quarterly/annual results are announced.

"There are two kinds of investors, be they large or small: those who don't know where the market is headed, and those who don't know that they don't know. Then again, there is a third type of investor -the investment professional, who indeed knows that he or she doesn't know, but whose livelihood depends upon appearing to know.

TARO 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 TARO's volatility from 26 Sep, 2018 to 6 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 TARO 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 TARO. Therefore, SP500 must receive a lower allocation than TARO in your portfolio. SP500 index usually has shorter drawdown period than TARO.

On a general note (since you are interested in TARO), if you are evaluating TARO as an investment candidate, then you should read about WTFC which has delivered similar performance and can help diversify your portfolio.

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