29.91 -0.09 (-0.3%) Sell

Don't buy VIAB now, it is a risky investment

13 min read

VIACOM INC. is a falling knife that can bleed you if you catch it on Friday. It lost -0.3% to close at 29.91. 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 -0.0233%.

[Themes containing VIAB]

VIAB showed a up trend over the last 3 months. During this period VIAB gained +2.89% and saw a maximum drawdown of -12.32%. It has been unusually choppy during this period. Long term investors are better off avoiding investing in VIAB till volatility reduces and a clear trend emerges.


VIAB has been outperforming the SP500 index in recent time. Over the last 2 years 11 months and 3 days, VIAB underperformed the SP500 index on 50% days. Which indicates that on days VIAB underperforms the SP500 index, it's performance is marginally worse than on the days it outperforms the SP500 index.

VIAB was profitable on 55% days in the last three months. During this time, it delivered on average +0.07% per day. It delivered it's worst daily return of -8.53%, during this period, on Wednesday, 24 Oct, 2018. There was initially a bullish trend during this period which started on 17 Sep, 2018 and went on till 24 Sep, 2018. The bullish trend returned +8.88% to investors. This was followed by a bearish trend that started on 19 Oct, 2018 and ended on 25 Oct, 2018. This bearish trend lost -12.38% of investor capital.

VIAB had 4 profitable and 8 loss making months over the last year. During the last year, VIAB underperformed SP500 index on monthly return basis. VIAB significantly outperformed SP500 index in Sep 2018, when it returned +15.3% compared to +4.75% returned by SP500 index during it's best month in the last one year - Jan 2018. VIAB had a longer winning streak of losing months than SP500 index. It went down in 4 straight months (from Feb 2018 to May 2018) during which period it delivered -18.51%. It is interesting to note that both VIAB and SP500 index significantly outperform during months when quarterly/annual results are announced.

The studios don't finance anymore, they get outside funds.
-- Robert Rodriguez

VIAB 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 VIAB's volatility from 11 Sep, 2018 to 19 Nov, 2018. While there was a significant surge in the SP500 index's volatility from 10 Sep, 2018 to 29 Oct, 2018.

Advanced/professional short-term investors should note that VIAB has significant positive skewness in it's return distribution. This indicates that investors can expect VIAB to recover from drawdowns quickly. Which makes VIAB a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.

Investors trading in VIAB derivatives at this moment can consider 'Protective Collar' options strategy to receive better risk-adjusted returns.

SP500 index has more chance of extreme outcomes than VIAB. Therefore, SP500 must receive a lower allocation than VIAB in your portfolio. VIAB usually has shorter drawdown period than the SP500 index.

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

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