EB Weekly Portfolio Report - Sunday, February 9, 2020
Upcoming Earnings Reports (New Feature)
The following companies will be reporting earnings this week and they're a component of one of our portfolios:
Monday, February 10: AMKR, APPS
Tuesday, February 11: None
Wednesday, February 12: AMAT
Thursday, February 13: ROKU, GNRC
Friday, February 14: None
PLEASE NOTE: The above companies were provided after scanning the Zacks Earnings Calendar. My research is limited to what Zacks provides and I also can make a mistake from time to time, so please check for earnings dates for all companies that you own. We do hold our portfolio stocks through one earnings report, but every EarningsBeats.com member must make their own investing/trading decisions about holding stocks into earnings reports as it's the most volatile (risky) time to own a stock.
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 generally no stops in place (KMX and UTHR were exceptions)
- Every stock will generally 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 CC (Character Change, formerly Value portfolio) and Aggressive portfolios to be the riskiest, followed by the Model portfolio, and then the Income portfolio
- The CC 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 and that's certainly what we've seen in its first 2 1/2 months.
- 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; please review inception-to-date charts to gain an idea of volatility associated with each
- 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. Please consult your financial advisor.
- EarningsBeats.com shareholders/employees may own all or some of the portfolio stocks from time to time.
Snapshot
Here's a weekly recap:
Three of our four portfolios bested the S&P 500 last week, but it was an all-around solid week. Here's a daily S&P 500 chart, with a possible new channel to watch:
We've already seen decent price support established just above 3200. Then, if I connect the September and January highs to draw an upper channel line and drag that same-sloped line down to the October price low, I can create a lower channel line that nearly intersects that price support currently. I believe the odds are fairly strong that the low we saw at the end of January will hold for the short-term, possibly the intermediate-term.
Weekly Summary
Benchmark S&P 500:
The S&P 500 rebounded quickly last week, rising 3.17% on the week, despite a drop on Friday. I honestly expected that we might see a bit more consolidation, but quick recoveries in a secular bull market is the norm, not the outlier.
Model Portfolio:
The Model portfolio also rebounded from a rough prior week, gaining 3.57% for the week. Here's the updated inception-to-date chart of the portfolio:
Here are how the Model portfolio component stocks performed last week:
EVER broke out to fresh new highs as volume expanded on Friday. I pointed out the following bull wedge breakout two weeks ago. The strength is continuing:
Aggressive Portfolio:
The Aggressive portfolio was last week's worst performing portfolio, though it did still gain 1.36%. Here's the Aggressive portfolio chart since its inception on May 19, 2019:
Here are how the Aggressive portfolio component stocks performed last week:
It's generally a good thing to see the portfolio rise, but to underperform by as much as the Aggressive portfolio did was disappointing. There were a couple reasons for the underperformance. First, both the S&P 600 Small Cap Index ($SML, +2.27%) and the S&P 400 Mid Cap Index ($MID, +2.10%) gained last week, but averaged 1 full percentage point beneath the S&P 500's return. That is not typically going to result in good things for this portfolio, which is concentrated in smaller issues. Second, BOOT reported results that were not viewed favorably by Wall Street. There was a clear breakdown on the daily chart, but the longer-term weekly uptrend remains for the stock, at least for now:
The blue-dotted short-term uptrend line was clearly broken, but the longer-term uptrend remains in play. While that's a bullish signal for longer-term investors, BOOT will only be in our Aggressive portfolio for another 10 days, so it'd be helpful if we see a rebound this week.
Income Portfolio:
The Income portfolio has been our strongest portfolio this quarter and added to its recent outperformance, tacking on another weekly gain of 3.98%. Here's a look at the inception-to-date chart:
Here are how the Income portfolio component stocks performed last week:
Unlike the other portfolios, the Income portfolio components went a perfect 10 for 10 in terms of gaining ground last week. 7 stocks outperformed the S&P 500, including massive outperformance by both Microsoft (MSFT) and Amgen (AMGN).
Character Change (CC, formerly Value) Portfolio:
The CC portfolio gained ground last week, rising 3.92%, after two horrible weeks in a row. Here is the inception-to-date chart since November 19, 2019:
Here are how the CC portfolio component stocks performed last week:
The CC portfolio also saw all 9 component stocks rise (UTHR stopped out nearly one month ago). RL reported better-than-expected quarterly results and moved to a new intra-quarter high, though it did back off from its Wednesday high:
RL also broke to a new 52 week relative high vs. the clothing & accessories group ($DJUSCF), suggesting that it remains a viable long candidate within the space.
Summary
Well, we have just a week and a half before the next batch of portfolio stocks will be released. I remain very positive on the Aggressive portfolio, even though it is now underperforming the benchmark S&P 500. It's receiving no current help from small and mid caps, but I believe that could change later in 2020. In the meantime, it's probably not a bad idea to keep some exposure in these underperforming areas, awaiting a relative reversal.
The CC portfolio has been the worst performing portfolio, but I believe this "character change" portfolio holds merit as well. I'll need a few more quarters to properly assess its prospects. Meanwhile, both the Model and Income portfolios remain strong, especially the latter. Large cap, mostly household names with relative strength and healthy dividends have been flourishing in the current market environment and that's essentially what the Income portfolio components provide us.
Happy trading!
Tom Bowley, Chief Market Strategist
EarningsBeats.com
"Better timing. Better trades."