WFC investors dump it
18 Dec, 201813 min read
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WELLS FARGO & COMPANY significantly underperformed today. It fell by -0.19% to close at 46.52. It's recent 5 day performance has been +0.15%, -1.04%, -1.49%, -0.04% and -2.13%.
WFC is currently in a bearish trend. The current bearish signal has generated a profit of +15.76% for investors in the last three months.
WFC has been underperforming the SP500 index in recent time. It showed significant underperformance (compared to the SP500 index) from 12 Jan, 2016 to 2 Oct, 2018. Over the last 2 years 11 months and 14 days, WFC underperformed the SP500 index on 53% days.
During the last three months WFC was mostly loss making and delivered on average -0.26% per day. It's best return during this period (of +3.33%) was on Thursday, 25 Oct, 2018. While it's worst loss in the same period (of -4.54%) was on Tuesday, 4 Dec, 2018. The longest stort-term trend during this period was 9 losing days, which started on 3 Dec, 2018 and ended on 14 Dec, 2018. This bearish trend lost -15.16% of investor capital.
During the last year WFC had 8 profitable months and 4 loss making months. Profitable number of months of WFC and SP500 index were the same. WFC was also a more risky investment than SP500 index as it's worst month in the last year, Dec 2018, returned -14.3% compared to -7.75% returned by SP500 index in Dec 2018. WFC 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 WFC and SP500 index significantly outperform during months when quarterly/annual results are announced.
Minimizing downside risk while maximizing the upside is a powerful concept.
-- Mohnish Pabrai
WFC is currently seeing overall increase in volatility. In comparison, the SP500 index is seeing increase in volatility. During the last three months, there was a significant surge in WFC's volatility from 3 Oct, 2018 to 25 Oct, 2018. While there was a significant surge in the SP500 index's volatility from 19 Sep, 2018 to 29 Oct, 2018.
Advanced/professional short-term investors should note that WFC has significant positive skewness in it's return distribution. This indicates that investors can expect WFC to recover from drawdowns quickly. Which makes WFC a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.
Investors trading in WFC 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 WFC. Therefore, SP500 must receive a lower allocation than WFC in your portfolio. SP500 index usually has shorter drawdown period than WFC.
Based on your interest in WFC you may find it interesting to know that OPNT is highly volatile and investors investing in it must take extreme caution. Consider either reducing your exposure to OPNT or sufficiently diversifying your portfolio.
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