TCI investors looking to exit as part of sectoral rotation
18 Dec, 201813 min read
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TRANSCONTINENTAL REALTY INVESTORS INC has destroyed investor wealth on Tuesday. It delivered -2.64% to close at 29.89. On a day when the overall market breadth was 34%, it closed higher than 5% of the market. In comparison, the benchmark SP500 index closed today at +0.01%.
Buy-and-Hold investors in TCI experienced a maximum drawdown of -18.67% over the last three months. It delivered -14.67% during this strong bearish 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 +1.63%.
TCI has been underperforming the SP500 index in recent time. It showed significant outperformance (compared to the SP500 index) from 20 Apr, 2016 to 11 May, 2018. Over the last 2 years 11 months and 14 days, TCI outperformed the SP500 index on 51% days.
During the last three months TCI was mostly loss making and delivered on average -0.22% per day. It's best return during this period (of +5.88%) was on Friday, 23 Nov, 2018. While it's worst loss in the same period (of -7.8%) was on Friday, 21 Sep, 2018. The longest stort-term trend during this period was 6 losing days, which started on 11 Dec, 2018 and ended on 18 Dec, 2018. This bearish trend lost -10.13% of investor capital.
The last 12 months saw TCI's investors making profits in 7 months and incurring losses in 5 months. TCI was less consistent in delivering monthly returs than SP500 index. TCI significantly outperformed SP500 index in Mar 2018, when it returned +35.91% compared to +4.75% returned by SP500 index during it's best month in the last one year - Jan 2018. TCI had a shorter streak of profitable months than SP500 index. It only went up in 3 straight months during the last year. It is interesting to note that both TCI and SP500 index significantly outperform during months when quarterly/annual results are announced.
Be quick in cutting your loses but not profits
-- Abhishek Shukla
TCI is currently seeing overall fall in volatility. In comparison, the SP500 index is seeing increase in volatility. During the last three months, there was a significant fall in TCI's volatility from 21 Sep, 2018 to 12 Dec, 2018. While there was a significant surge in the SP500 index's volatility from 19 Sep, 2018 to 29 Oct, 2018.
Advanced/professional short-term investors should note that TCI 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 TCI. Therefore, SP500 must receive a lower allocation than TCI in your portfolio. SP500 index usually has shorter drawdown period than TCI.
Based on your interest in TCI you may find it interesting to know that AMZN is a large cap that has shown remarkable performance and deserves to be on every investors' watchlist.
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