Stop-loss on the minds of TREE investors as it underperforms broader market
13 Dec, 201813 min read
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LENDINGTREE, INC. delivered massive losses on Thursday. It delivered -5.22% to close at 235.43. On a day when the overall market breadth was 35%, it closed higher than 90% of the market. In comparison, the benchmark SP500 index closed today at -0.0002%.
Buy-and-Hold investors in TREE experienced a maximum drawdown of -21.09% over the last three months. It delivered -0.2% during this flat trending period. There were both Long and Short signals during this period, while the long signals were marginally more profitable than the short signals.
TREE has been underperforming the SP500 index in recent time. It showed significant outperformance (compared to the SP500 index) from 9 Feb, 2016 to 23 Jan, 2018. Over the last 2 years 11 months and 9 days, TREE outperformed the SP500 index on 53% days.
During the last three months TREE delivered losses on 54% days. However, it still managed to end this period in a profit. It's best return during this period (of +24.15%) was on Thursday, 1 Nov, 2018. While it's worst loss in the same period (of -7.32%) was on Friday, 7 Dec, 2018. The longest stort-term trends during this period were 5 profitable and losing days. The bullish trend (which returned +13.24%) started on 21 Nov, 2018 and went on till 28 Nov, 2018 while the bearish trend (which returned -9.03%) started on 8 Oct, 2018 and went on till 12 Oct, 2018.
The last 12 months saw TREE's investors making profits in 5 months and incurring losses in 7 months. TREE was less consistent in delivering monthly returs than SP500 index. TREE significantly outperformed SP500 index in Nov 2018, when it returned +29.08% compared to +4.75% returned by SP500 index during it's best month in the last one year - Jan 2018. TREE had a longer winning streak of losing months than SP500 index. It went down in 3 straight months (from Feb 2018 to Apr 2018) during which period it delivered -37.05%. It is interesting to note that both TREE and SP500 index significantly outperform during months when quarterly/annual results are announced.
Making money from enforcing patents is no more wrong than investing in preferred stock.
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TREE 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 TREE's volatility from 14 Sep, 2018 to 29 Oct, 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 TREE 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 TREE. Therefore, SP500 must receive a lower allocation than TREE in your portfolio. SP500 index usually has shorter drawdown period than TREE.
On a general note (since you are interested in TREE), two instruments that deserve special mention are HEAR and DFBG. They have significantly outperformed the overall market this year.
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