Don't consider buying ZTS now, it is risky at the moment
07 Dec, 201813 min read
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ZOETIS INC. was among the worst performers on Friday. It lost -2.57% to close at 88.09. On a day when the overall market breadth was 35%, it closed higher than 5% of the market. In comparison, the benchmark SP500 index closed today at -0.0233%.
ZTS showed a flat trend over the last 3 months. During this period ZTS returned -0.88% and saw a maximum drawdown of -7.54%. It has been unusually choppy during this period. Long term investors are better off avoiding investing in ZTS till volatility reduces and a clear trend emerges.
ZTS has been underperforming the SP500 index in recent time, after having outperformed till 12 Nov, 2018. Over the last 2 years 11 months and 3 days, ZTS outperformed the SP500 index on 53% days.
During the last three months ZTS was mostly profitable and delivered on average -0.0% per day. It's best return during this period (of +4.55%) was on Thursday, 1 Nov, 2018. While it's worst loss in the same period (of -3.21%) was on Tuesday, 4 Dec, 2018. There was initially a bullish trend during this period which started on 25 Sep, 2018 and went on till 3 Oct, 2018. The bullish trend returned +4.26% to investors. This was followed by a bearish trend that started on 12 Nov, 2018 and ended on 15 Nov, 2018. This bearish trend lost -3.88% of investor capital.
ZTS had 10 profitable and 2 loss making months over the last year. ZTS was profitable in more months than SP500 index. ZTS significantly outperformed SP500 index in Jan 2018, when it returned +6.91% compared to +4.75% returned by SP500 index during it's best month in the last one year - Jan 2018. ZTS had a longer winning streak of profitable months than SP500 index. It went up in 9 straight months (from Jan 2018 to Sep 2018) during which period it delivered +27.2%.
Wealth is the ability to fully experience life.
-- Henry David Thoreau
ZTS is becoming more volatile overall. In comparison, the SP500 index is seeing a rise in volatility. During the last three months, there was a significant surge in ZTS's volatility from 2 Oct, 2018 to 2 Nov, 2018. While there was a significant surge in the SP500 index's volatility from 10 Sep, 2018 to 29 Oct, 2018.
Advanced/professional short-term investors should note that ZTS 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.
Investors trading in ZTS derivatives at this moment can consider 'Bull Call Spread' options strategy to receive better risk-adjusted returns.
SP500 index has more chance of extreme outcomes than ZTS. Therefore, SP500 must receive a lower allocation than ZTS in your portfolio. SP500 index usually has shorter drawdown period than ZTS.
On a general note (since you are interested in ZTS), two large cap instruments that deserve special mention are AMZN and PFE. They have significantly outperformed the overall market.
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