Don't go profit booking on WPP now, it delivered a decent return
17 Dec, 201813 min read
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WPP outperformed today. On a longer term basis, investors in WPP PLC (Foreign) made -0.01% per day. Monday's performance of +0.65% was a outperformance compared to it's daily average.
WPP showed a strong bearish trend over the last 3 months. During this period WPP delivered -26.8% and saw a maximum drawdown of -32.26%. There were 2 short signals during this period that returned a cumulative of +25.34% to investors.
WPP has been outperforming the SP500 index in recent time. It showed significant underperformance (compared to the SP500 index) from 19 Apr, 2016 to 8 Nov, 2018. Over the last 2 years 11 months and 10 days, WPP underperformed the SP500 index on 49% days. Which indicates that on days WPP underperforms the SP500 index, it's performance is marginally worse than on the days it outperforms the SP500 index.
WPP returned losses on 59% days in the last three months. During this time, it delivered on average -0.45% per day. It delivered it's worst daily return of -17.3%, during this period, on Thursday, 25 Oct, 2018. The longest stort-term trends during this period were 4 profitable and losing days. The bullish trend (which returned +4.04%) started on 19 Oct, 2018 and went on till 24 Oct, 2018 while the bearish trend (which returned -4.61%) started on 15 Nov, 2018 and went on till 20 Nov, 2018.
The last 12 months saw WPP's investors making profits in 4 months and incurring losses in 8 months. WPP was less consistent in delivering monthly returs than SP500 index. WPP was also a more risky investment than SP500 index as it's worst month in the last year, Oct 2018, returned -24.02% compared to -7.28% returned by SP500 index in Oct 2018. WPP had a longer winning streak of losing months than SP500 index. It went down in 4 straight months (from Sep 2018 to Dec 2018) during which period it delivered -39.45%. It is interesting to note that both WPP and SP500 index significantly outperform during months when quarterly/annual results are announced.
It takes as much energy to wish as it does to plan.
-- Eleanor Roosevelt
WPP 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 WPP's volatility from 18 Sep, 2018 to 25 Oct, 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 WPP has significant positive skewness in it's return distribution. This indicates that investors can expect WPP to recover from drawdowns quickly. Which makes WPP a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.
SP500 index has more chance of extreme outcomes than WPP. Therefore, SP500 must receive a lower allocation than WPP in your portfolio. WPP usually has shorter drawdown period than the SP500 index.
On a general note (since you are interested in WPP), two mid cap instruments that deserve special mention are RHT and LULU. They have significantly outperformed the overall market.
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