348.08 -5.39 (-1.55%) Sell

Prayers for TDG investors as it delivered massive losses

13 min read

TRANSDIGM GROUP INC was among the worst performers on Thursday. It delivered -1.55% to close at 348.08. On a day when the overall market breadth was 35%, it closed higher than 78% of the market. In comparison, the benchmark SP500 index closed today at -0.0002%.

[Themes containing TDG]

Buy-and-Hold investors in TDG experienced a maximum drawdown of -16.29% over the last three months. It delivered -5.92% during this 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.


TDG has been outperforming the SP500 index in recent time. It showed significant outperformance (compared to the SP500 index) from 24 Mar, 2017 to 29 Nov, 2018. Over the last 2 years 11 months and 9 days, TDG outperformed the SP500 index on 56% days.

TDG returned losses on 58% days in the last three months. During this time, it delivered on average -0.07% per day. It delivered it's best daily return of +5.26%, during this period, on Tuesday, 16 Oct, 2018. The longest stort-term trend during this period was 7 losing days, which started on 4 Oct, 2018 and ended on 12 Oct, 2018. This bearish trend lost -13.83% of investor capital.

The last 12 months saw TDG's investors making profits in 8 months and incurring losses in 4 months. During the last year, TDG and SP500 index had the same number of profitable months. TDG significantly outperformed SP500 index in Jan 2018, when it returned +15.19% compared to +4.75% returned by SP500 index during it's best month in the last one year - Jan 2018. TDG had a shorter streak of profitable months than SP500 index. It only went up in 5 straight months during the last year. It is interesting to note that both TDG and SP500 index significantly outperform during months when quarterly/annual results are announced.

"The financial markets generally are unpredictable. So that one has to have different scenarios... The idea that you can actually predict what's going to happen contradicts my way of looking at the market.

TDG 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 surge in TDG's volatility from 28 Sep, 2018 to 6 Nov, 2018. While there was a significant surge in the SP500 index's volatility from 14 Sep, 2018 to 29 Oct, 2018.

Advanced/professional short-term investors should note that TDG has significant positive skewness in it's return distribution. This indicates that investors can expect TDG to recover from drawdowns quickly. Which makes TDG 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 TDG. Therefore, SP500 must receive a lower allocation than TDG in your portfolio. TDG usually has shorter drawdown period than the SP500 index.

On a general note (since you are interested in TDG), two mid cap instruments that deserve special mention are SQ and AMD. They have significantly outperformed the overall market.

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