34.84 -0.16 (-0.46%) Sell

YUMC is a falling knife, continues to bleed every investor trying to catch it

13 min read

YUM CHINA HOLDINGS, INC. was among the worst performers on Tuesday. It lost -0.46% to close at 34.84. It is currently trading -27% below it's 52 week high of 48.18.

[Themes containing YUMC]

YUMC showed a flat trend over the last 3 months. During this period YUMC returned +0.09% and saw a maximum drawdown of -11.51%. It has been unusually choppy during this period. Long term investors are better off avoiding investing in YUMC till volatility reduces and a clear trend emerges.


YUMC has been outperforming the SP500 index in recent time. Over the last 2 years 2 months and 1 days, YUMC outperformed the SP500 index on 52% days.

YUMC returned losses on 54% days in the last three months. During this time, it delivered on average +0.03% per day. It delivered it's best daily return of +13.85%, during this period, on Wednesday, 31 Oct, 2018. There was initially a bullish trend during this period which started on 21 Nov, 2018 and went on till 28 Nov, 2018. The bullish trend returned +5.43% to investors. This was followed by a bearish trend that started on 4 Dec, 2018 and ended on 11 Dec, 2018. This bearish trend lost -4.92% of investor capital.

YUMC had 4 profitable and 8 loss making months over the last year. During the last year, YUMC underperformed SP500 index on monthly return basis. YUMC significantly outperformed SP500 index in Jan 2018, when it returned +14.18% compared to +4.75% returned by SP500 index during it's best month in the last one year - Jan 2018. YUMC had a longer winning streak of losing months than SP500 index. It went down in 3 straight months (from May 2018 to Jul 2018) during which period it delivered -15.26%. It is interesting to note that both YUMC and SP500 index significantly outperform during months when quarterly/annual results are announced.

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YUMC 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 fall in YUMC's volatility from 19 Sep, 2018 to 28 Sep, 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 YUMC has significant positive skewness in it's return distribution. This indicates that investors can expect YUMC to recover from drawdowns quickly. Which makes YUMC 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 YUMC. Therefore, SP500 must receive a lower allocation than YUMC in your portfolio. SP500 index usually has shorter drawdown period than YUMC.

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

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