EB Weekly Portfolio Report - Sunday, December 8, 2019
Portfolio Rules and Objectives
Here are the common traits and objectives of each portfolio:
- There are 10 leading stocks from 10 leading industries in each portfolio (at the time of selection)
- They are held for an entire 90 day period, with no stops in place
- Every stock will be held through ONE earnings report
- The expectation is that relative winners will carry the portfolio to outperformance
- They are all entered into as of February 19, May 19, August 19, and November 19 (these dates are used as we are generally past the majority of earnings reports by these dates)
- Primary objective is to outperform the benchmark S&P 500
Here are several considerations for EB members:
- I would expect the Aggressive portfolio to be the riskiest, followed by the Model portfolio, and then the Income portfolio
- The Value portfolio is a new breed and is much different from the others; it's quite diversified, but how it ranks in volatility among the four remains to be seen - I would anticipate high volatility
- The Income portfolio stocks will all pay dividends, with the expected average dividend yield to be at least 1.5%
- Drawdowns (losses) should be much milder on the Income portfolio, with more volatility expected on the other three
- You should own or trade these stocks in whatever manner is most comfortable for you; while we buy all 10 stocks as of the dates identified above, feel free to trade certain stocks or wait for pullbacks if the stocks are overbought
- We have no idea what risk each member is willing or able to take. We are not registered investment advisors so be sure you understand the risk you take.
- EarningsBeats.com shareholders/employees may own all or some of the portfolio stocks from time to time.
Snapshot
Here's a weekly recap:
Weekly Summary
Benchmark S&P 500:
I've discussed the S&P 500 and divergences and possible consolidation in the near-term, but there's one thing we should keep in mind. The weekly chart remains very strong with no such negative divergence. Therefore, I fully expect we're going higher, it's simply a matter of whether it'll happen this week. The upcoming week is notoriously weak from a historical perspective. The S&P 500 has produced annualized returns of -12.78% from December 7th through December 15th over the past 7 decades. Still, the weekly chart looks bullish:
We're approaching an overbought weekly RSI (black arrow), but we're not there yet. Furthermore, in a secular bull market, we can see weekly RSIs move above and stay above 70 for weeks at a time. I would not move to cash simply because the stock market becomes overbought.
Model Portfolio:
The Model portfolio paused last week, losing a fractional 0.03%. Here's the updated inception-to-date chart of the portfolio:
Here are how the Model portfolio component stocks performed last week:
ROKU was downgraded early in the week and was extremely volatile, holding back the overall portfolio:
ROKU:
After the downgrade, ROKU bounced nicely from the low 130s so I'd look for that level to provide initial support on any further selling. There's also trendline support just beneath 130 to watch.
Aggressive Portfolio:
The Aggressive portfolio nearly mirrored the S&P 500 last week, gaining slightly more at 0.27%. Here's the Aggressive portfolio chart since its inception on May 19, 2019:
Here are how the Aggressive portfolio component stocks performed last week:
While the Aggressive portfolio finished close to breakeven for the week, I think it's clear that there was a lot of volatility among individual stocks, as you can see above. EVRI appears as though it could be headed down to test gap support from 10.40 to 11.00:
EVRI:
The breakout area was around 12.40, which was lost last week. Then on increasing volume, the 20 day EMA was lost with a failed attempt to reclaim it the next day. While I still like the stock, I wouldn't at all be surprised if it has another rough week ahead.
On a more positive note, both CDLX and GNRC broke out to fresh new highs last week.
Income Portfolio:
The Income portfolio gained a slight 0.06% last week, coming up just short of the S&P 500. Here's a look at the inception-to-date chart:
Here are how the Income portfolio component stocks performed last week:
All stocks in the Income portfolio remain quite solid technically. MSCI last week made a breakout worth noting:
MSCI:
The green arrow shows a successful test of the rising 20 day EMA just before its latest break to fresh highs.
Value Portfolio:
The Value portfolio bounced back nicely last week, gaining 1.03%, well above the S&P 500 and the other 3 portfolios. Here is the inception-to-date chart:
Here are how the Value portfolio component stocks performed last week:
EVH, MUR and RL led the Value portfolio last week. We'll want to keep a close eye on MUR as it's up against very important price resistance from 24.50 to 25.00.
MUR:
MUR is in a bull flag with much-improved volume trends. A big volume close above 25 could signal the start of a much larger rally.
Summary
Value stocks outperformed growth stocks 4 out of 5 days last week, yet our portfolios managed to hang in there pretty well. Small cap ($SML) and mid cap ($MID) both outperformed the S&P 500 and that, if it continues, should benefit both the Aggressive and Value portfolios, both of which have major representation from small and mid cap stocks.
I think it's worth pointing out that the Aggressive portfolio is up more than 4 percentage points over the S&P 500 in a market where small and mid cap stocks have underperformed. Check this chart out:
The blue-dotted vertical line marks the start of the Aggressive portfolio on May 19th. Both small caps ($SML) and mid caps ($MID) have underperformed the large cap S&P 500 by a fairly wide margin. Yet, even under these trying circumstances, the Aggressive portfolio has managed to outperform the benchmark S&P 500. Imagine how 2020 could turn out for this portfolio if small and mid caps begin to outperform.
Happy trading!
Tom Bowley, Chief Market Strategist
EarningsBeats.com
"Better timing. Better trades."