XYL continues its fall as more investors loose confidence
14 Dec, 201813 min read
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XYLEM INC. underperformed on Friday. It lost -0.23% to close at 65.44. It is currently trading -20% below it's 52 week high of 81.87.
Buy-and-Hold investors in XYL experienced a maximum drawdown of -20.45% over the last three months. It lost -19.74% during this strong down trending period. There were both Long and Short signals during this period, where the short signals were significantly more profitable than the long signals. The net profit from Short signals was +15.82%.
XYL has been underperforming the SP500 index in recent time, after having outperformed till 20 Apr, 2018. Over the last 2 years 11 months and 10 days, XYL outperformed the SP500 index on 55% days.
XYL returned losses on 61% days in the last three months. During this time, it delivered on average -0.33% per day. It delivered it's worst daily return of -5.89%, during this period, on Tuesday, 4 Dec, 2018. There was initially a bearish trend during this period which started on 4 Oct, 2018 and went on till 11 Oct, 2018. The trend delivered -15.23% losses to investors. This was followed by a bullish trend that started on 5 Nov, 2018 and ended on 8 Nov, 2018. This bullish trend delivered +5.12% to investors.
XYL had 6 profitable and 6 loss making months over the last year. During the last year, XYL underperformed SP500 index on monthly return basis. XYL was also a more risky investment than SP500 index as it's worst month in the last year, Oct 2018, returned -18.68% compared to -7.28% returned by SP500 index in Oct 2018. XYL had a shorter streak of profitable months than SP500 index. It only went up in 3 straight months during the last year. It is interesting to note that both XYL and SP500 index significantly outperform during months when quarterly/annual results are announced.
If you have trouble imagining a 20% loss in the stock market, you shouldn't be in stocks.
-- John Bogle
XYL 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 XYL's volatility from 17 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 XYL 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 XYL. Therefore, SP500 must receive a lower allocation than XYL in your portfolio. SP500 index usually has shorter drawdown period than XYL.
On a general note (since you are interested in XYL), if you are evaluating XYL as an investment candidate, then you should read about GAIN which has delivered similar performance and can help diversify your portfolio.
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