52.0 -0.22 (-0.42%) Sell

Stop-loss on the minds of TD investors as it destroyed investor wealth

13 min read

TORONTO DOMINION BANK (Foreign) ranked among the worst performers today. It lost -0.42% to close at 52.0. During the last week it returned +0.13% and saw a maximum drawdown of -0.42% before bouncing back.

[Themes containing TD]

Buy-and-Hold investors in TD experienced a maximum drawdown of -16.11% over the last three months. It lost -14.39% 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 +12.16%.


TD has been underperforming the SP500 index in recent time, after having outperformed till 22 Nov, 2017. Over the last 2 years 11 months and 10 days, TD outperformed the SP500 index on 52% days.

During the last three months TD was mostly loss making and delivered on average -0.24% per day. It's best return during this period (of +2.49%) was on Wednesday, 28 Nov, 2018. While it's worst loss in the same period (of -2.74%) was on Tuesday, 20 Nov, 2018. There was initially a bearish trend during this period which started on 2 Oct, 2018 and went on till 11 Oct, 2018. The trend delivered -7.11% losses to investors. This was followed by a bullish trend that started on 12 Oct, 2018 and ended on 16 Oct, 2018. This bullish trend delivered +1.58% to investors.

TD had 5 profitable and 7 loss making months over the last year. During the last year, TD underperformed SP500 index on monthly return basis. TD was also a more risky investment than SP500 index as it's worst month in the last year, Oct 2018, returned -9.3% compared to -7.28% returned by SP500 index in Oct 2018. TD 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 TD and SP500 index significantly outperform during months when quarterly/annual results are announced.

"All intelligent investing is value investing - acquiring more that you are paying for. You must value the business in order to value the stock.

TD 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 TD's volatility from 21 Sep, 2018 to 7 Dec, 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 TD 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 TD. Therefore, SP500 must receive a lower allocation than TD in your portfolio. SP500 index usually has shorter drawdown period than TD.

On a general note (since you are interested in TD), three mid cap instruments that deserve special mention are SQ, ABMD and LULU. They have all outperformed the market and must be closely watched for investment opportunities.

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