1016.16 -16.65 (-1.64%) Sell

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

14 min read

Food was among the worst performers today. It delivered -1.64% to close at 1016.16. It's recent 5 day performance has been -0.61%, -2.01%, 0.0%, +0.34% and +0.4%.

[Theme constituents]

~FOOD showed a bearish trend over the last 3 months. During this period ~FOOD delivered -4.54% and saw a maximum drawdown of -5.45%. It has been unusually choppy during this period. Long term investors are better off avoiding investing in ~FOOD till volatility reduces and a clear trend emerges.


~FOOD has been underperforming the SP500 index in recent time. It showed significant underperformance (compared to the SP500 index) from 29 Dec, 2016 to 1 Oct, 2018. Over the last 2 years and 1 month, ~FOOD underperformed the SP500 index on 50% days. Which indicates that on days ~FOOD underperforms the SP500 index, it's performance is marginally worse than on the days it outperforms the SP500 index.

~FOOD returned losses on 61% days in the last three months. During this time, it delivered on average -0.07% per day. It delivered it's best daily return of +2.56%, during this period, on Tuesday, 30 Oct, 2018. The longest stort-term trend during this period was 4 losing days, which started on 24 Sep, 2018 and ended on 27 Sep, 2018. This bearish trend lost -3.22% of investor capital.

The last 12 months saw ~FOOD's investors making profits in 7 months and incurring losses in 5 months. ~FOOD was less consistent in delivering monthly returs than SP500 index. ~FOOD was also a less risky investment than SP500 index as it's worst month in the last year, Feb 2018, returned -6.64% compared to -7.28% returned by SP500 index in Oct 2018. ~FOOD 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 ~FOOD and SP500 index significantly outperform during months when quarterly/annual results are announced.

"I grew up in Finance.

~FOOD 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 ~FOOD's volatility from 11 Sep, 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 ~FOOD has significant positive skewness in it's return distribution. This indicates that investors can expect ~FOOD to recover from drawdowns quickly. Which makes ~FOOD a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.

~FOOD has more chance of extreme outcomes than the SP500 index. Therefore, ~FOOD must receive a lower allocation than SP500 in your portfolio. SP500 index usually has shorter drawdown period than ~FOOD.

Based on your interest in ~FOOD you may find it interesting to know that AMD, ABMD and TWTR are mid caps that have all shown remarkable performance and qualify to be on every investor's watchlist.

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