American Equity Investment Life stock (NYSE: AEL) has seen major volatility over the last two weeks (10 trading days) – the stock has moved 44% to $32 now. This jump was a reaction to the news that the company received a takeover offer in early September from Athene Holding and Massachusetts Mutual Life Insurance, offering $36 per share in cash. But will the company’s stock continue its upward trajectory over the coming weeks, or is a drop in the stock imminent?
According to the Trefis Machine Learning Engine, which identifies trends in the company’s stock price using 20 years of historical stock data, AEL stock is likely to give an average return of -1.9% over the next two weeks (10 trading days) after moving 47% in the past two weeks (10 trading days). Notably, there is a bleak 33% chance that the stock will outperform the S&P500 index over the same period.
But how would these numbers change if you are interested in holding American Equity Investment Life stock for a shorter or a longer time? You can test the answer and many other combinations on the Trefis Machine Learning Engine to test the Average and Excess Return after a Fall or Rise in American Equity Investment Life stock. You can test the chance of recovery over different time intervals of a quarter, month, or even just 1 day!
MACHINE LEARNING ENGINE – try it yourself:
IF American Equity Investment Life stock moved by -5% over 5 trading days, THEN over the next 21 trading days, AEL stock moves an average of 2.4 percent, which implies an excess return of 1.4 percent compared to the S&P500.
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More importantly, there is 58% probability of a positive return over the next 21 trading days and 54% probability of a positive excess return after a -5% change over 5 trading days.
Some Fun Scenarios, FAQs & Making Sense of American Equity Investment Life Stock Movements:
Question 1: Is the average return for American Equity Investment Life stock higher after a drop?
Consider two situations,
Case 1: American Equity Investment Life stock drops by -5% or more in a week
Case 2: American Equity Investment Life stock rises by 5% or more in a week
Is the average return for American Equity Investment Life stock higher over the subsequent month after Case 1 or Case 2?
AEL stock fares better after Case 1, with an average return of 3% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an average return of -2.1% for Case 2.
In comparison, the S&P 500 has an average return of 3.1% over the next 21 trading days under Case 1, and an average return of just 0.5% for Case 2 as detailed in our dashboard that details the average return for the S&P 500 after a fall or rise.
Try the Trefis machine learning engine above to see for yourself how American Equity Investment Life stock is likely to behave after any specific gain or loss over a period.
Question 2: Does patience pay?
If you buy and hold American Equity Investment Life stock, the expectation is over time the near term fluctuations will cancel out, and the long-term positive trend will favor you – at least if the company is otherwise strong.
Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!
For AEL stock, the returns over the next N days after a -5% change over the last 5 trading days is detailed in the table below, along with the returns for the S&P500:
Question 3: What about the average return after a rise if you wait for a while?
The average return after a rise is understandably lower than after a fall as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks – although AEL stock appears to be an exception to this general observation.
AEL’s returns over the next N days after a 5% change over the last 5 trading days is detailed in the table below, along with the returns for the S&P500:
It’s pretty powerful to test the trend for yourself for American Equity Investment Life stock by changing the inputs in the charts above.
What if you’re looking for a more balanced portfolio instead? Here’s a high quality portfolio to beat the market, with over 100% return since 2016, versus 55% for the S&P 500. Comprised of companies with strong revenue growth, healthy profits, lots of cash, and low risk, it has outperformed the broader market year after year, consistently.