WDC investors incur serious losses
14 Dec, 201813 min read
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WESTERN DIGITAL CORP is a falling knife that can bleed you if you catch it on Friday. It delivered -2.95% to close at 38.78 which is it's 52 week low, down -63% from it's 52 week high.
Buy-and-Hold investors in WDC experienced a maximum drawdown of -36.13% over the last three months. It delivered -32.18% during this strong bearish trending period. There were no long signals during this period, where the short signal generated good profits of +32.18% for investors.
WDC has been underperforming the SP500 index in recent time. It showed significant underperformance (compared to the SP500 index) from 16 Mar, 2018 to 13 Dec, 2018. Over the last 2 years 11 months and 10 days, WDC underperformed the SP500 index on 49% days. Which indicates that on days WDC underperforms the SP500 index, it's performance is marginally worse than on the days it outperforms the SP500 index.
WDC returned losses on 56% days in the last three months. During this time, it delivered on average -0.55% per day. It delivered it's worst daily return of -18.18%, during this period, on Friday, 26 Oct, 2018. The longest stort-term trend during this period was 6 losing days, which started on 4 Oct, 2018 and ended on 11 Oct, 2018. This bearish trend lost -7.45% of investor capital.
The last 12 months saw WDC's investors making profits in 4 months and incurring losses in 8 months. WDC was less consistent in delivering monthly returs than SP500 index. WDC was also a more risky investment than SP500 index as it's worst month in the last year, Oct 2018, returned -25.77% compared to -7.28% returned by SP500 index in Oct 2018. WDC had a longer winning streak of losing months than SP500 index. It went down in 5 straight months (from Jun 2018 to Oct 2018) during which period it delivered -60.46%.
Financial security and independence are like a three-legged stool resting on savings, insurance and investments.
-- Brian Tracy
WDC 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 WDC's volatility from 27 Sep, 2018 to 1 Nov, 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 WDC has significant positive skewness in it's return distribution. This indicates that investors can expect WDC to recover from drawdowns quickly. Which makes WDC a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.
Investors trading in WDC derivatives at this moment can consider 'Married Call' options strategy to receive better risk-adjusted returns.
SP500 index has more chance of extreme outcomes than WDC. Therefore, SP500 must receive a lower allocation than WDC in your portfolio. SP500 index usually has shorter drawdown period than WDC.
Based on your interest in WDC you may find it interesting to know that ABMD and SQ are both mid caps that have shown remarkable performance and deserve to be on every investors' watchlist.
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