TELECOM ARGENTINA SA (FOREIGN)

16.88 +0.7 (+4.13%) Sell

Don't go profit booking on TEO now, it delivered a decent return

13 min read

TELECOM ARGENTINA SA (Foreign) delivered stellar performance on Tuesday. It gained +4.13% to close at 16.88. On a day when the overall market breadth was 35%, it closed higher than 75% of the market. In comparison, the benchmark SP500 index closed today at -0.0004%.

[Themes containing TEO]

TEO showed a down trend over the last 3 months. During this period TEO returned -3.27% and saw a maximum drawdown of -17.59%. It has been unusually choppy during this period. Long term investors are better off avoiding investing in TEO till volatility reduces and a clear trend emerges.

Trend

TEO has been underperforming the SP500 index in recent time, after having outperformed till 20 Dec, 2017. Over the last 2 years 11 months and 7 days, TEO underperformed the SP500 index on 51% days.

TEO returned losses on 54% days in the last three months. During this time, it delivered on average -0.03% per day. It delivered it's best daily return of +5.43%, during this period, on Wednesday, 19 Sep, 2018. There was initially a bullish trend during this period which started on 18 Sep, 2018 and went on till 21 Sep, 2018. The bullish trend returned +12.41% to investors. This was followed by a bearish trend that started on 8 Nov, 2018 and ended on 13 Nov, 2018. This bearish trend lost -10.42% of investor capital.

On monthly basis, TEO delivered losses in more months over the last year, than profits. TEO delivered profits less regularly than SP500 index. TEO was also a more risky investment than SP500 index as it's worst month in the last year, May 2018, returned -26.66% compared to -7.28% returned by SP500 index in Oct 2018. TEO had a longer winning streak of losing months than SP500 index. It went down in 5 straight months (from Feb 2018 to Jun 2018) during which period it delivered -65.69%. It is interesting to note that both TEO and SP500 index significantly outperform during months when quarterly/annual results are announced.

Some of the people in finance touch enormous parts of the economy.
-- Stephen A. Schwarzman

TEO 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 TEO's volatility from 17 Sep, 2018 to 25 Sep, 2018. While there was a significant surge in the SP500 index's volatility from 13 Sep, 2018 to 29 Oct, 2018.

Advanced/professional short-term investors should note that TEO 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 TEO. Therefore, SP500 must receive a lower allocation than TEO in your portfolio. SP500 index usually has shorter drawdown period than TEO.

Based on your interest in TEO you may find it interesting to know that VIPS and EPIX are highly volatile and therefore risky. Investors should consider limiting their exposure to these instruments (because of their volatile nature).

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