EB Weekly Portfolio Report - Sunday, December 29, 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:
Overall it was a solid week for the portfolios, but I've been noticing a pattern of poor performance on Fridays. Once again, this past Friday was not good. It was a really good week for the portfolios through Thursday's close, but....
Weekly Summary
Benchmark S&P 500:
The S&P 500 had another solid week, this time gaining 0.58%. Both small caps ($SML) and mid caps ($MID) lost a bit of ground last week, which made outperformance in both the Aggressive and Value portfolios more noteworthy. Here is the weekly performance of individual sectors:
Leadership came in the form of aggressive sectors mostly. Consumer discretionary (XLY) no doubt benefited from very strong action last week in Amazon.com (AMZN), which rose 4.66% on the week. AMZN is, by far, the largest component of the XLY, representing 22% of the ETF.
Model Portfolio:
The Model portfolio was essentially flat last week, adding 0.01%. The week was solid until losses on Friday, where prior gains were completely erased. Here's the updated inception-to-date chart of the portfolio:
Here are how the Model portfolio component stocks performed last week:
KMX struggled to open the week and closed beneath 90.00. As I mentioned last week, a close below 90.00 was our stop, so we exited the KMX position at Monday's close of 89.18. While I would have preferred to have been able to exit the KMX position after a rally to perhaps the 20 day EMA, the next key level of price support after 90 was closer to 79. I didn't want the portfolio to bear that risk. For now, the KMX position resides in cash until either a replacement is found....or until February 19th, when a new list of Model portfolio stocks will be revealed.
Aggressive Portfolio:
The Aggressive portfolio was enjoying another very strong week until Friday, but still managed to perform well despite Friday's weakness, gaining 0.96% last week. The outperformance was even more encouraging as both small caps and mid caps again struggled last week on a relative basis vs. the benchmark S&P 500. Remember, the Aggressive portfolio consists of 5 small caps, 4 mid caps, and just 1 large cap. Here's the Aggressive portfolio chart since its inception on May 19, 2019:
At some point, the relative weakness in small and mid caps stocks could have a detrimental effect on this portfolio, but thus far it has not. I have to believe that if 2020 turns out to be a strong year for small caps, our Aggressive portfolio will benefit big time.
Here are how the Aggressive portfolio component stocks performed last week:
APPS fell 8.42% on Friday and AMKR dropped 4.39%, reversing what had been an exceptionally strong week for both stocks and the portfolio in general.
Income Portfolio:
The Income portfolio was once again the least volatile portfolio, gaining 0.78% last week, and slightly outperforming the benchmark S&P 500. Here's a look at the inception-to-date chart:
Here are how the Income portfolio component stocks performed last week:
AAPL remains a big reason why the Income portfolio is performing well. INTC had an excellent week and broke out to an all-time high, so I'd look for this semiconductor giant to help lead the portfolio higher. RTN, like INTC, also moved to an all-time high close.
Value Portfolio:
The Value portfolio had a solid week, posting a 1.10% gain. Here is the inception-to-date chart since November 19, 2019:
The Value portfolio has been unpredictable, but considering that the makeup of the portfolio consists of companies that are attempting to reverse a prior downtrend.....it really makes sense. I still expect that we'll see big winners and big losers in the group, but the idea is that we'll see more winners and the percentages will be better with the winners.
Here are how the Value portfolio component stocks performed last week:
It would've been a rather flat, ordinary week for the Value portfolio, if it weren't for the big gains in EVH. A close above 9 on EVH could lead to further gains near-term. EVH has easily been the most volatile stock in any of the portfolios this quarter. Failure to clear 9 next week could be problematic.
Summary
Today's report is pretty lean with no individual stock charts as I'm running short on time. Overall, however, I was pleased with performance last week. The biggest concern was the failure of KMX to deliver a solid earnings report and having to place a stop, which was triggered. While that might prove to be premature, I think it's important to guard against missed EPS expectations leading to further losses.
I hope you're enjoying the holidays with family and friends! Please be safe throughout the holidays!
Happy trading and HAPPY NEW YEAR!
Tom Bowley, Chief Market Strategist
EarningsBeats.com
"Better timing. Better trades."