EB Weekly Portfolio Report - Sunday, February 16, 2020

Tom Bowley - February 16, 2020

Top 10 Stocks Webinar on Wednesday

Mark your calendar! We will be having our quarterly "Top 10 Stocks" webinar on Wednesday, February 19th at 5:00pm EST. For our newer members, this is the day when all of our portfolio stocks are announced, replacing the 10 stocks from the prior quarter. This is a regular quarterly event. Our strategy is to provide 10 stocks that are relative strength leaders, mostly from leading industry groups as well. It's a "best of the best" strategy that has carried three of our four portfolios to gains that have outperformed the benchmark S&P 500 since their respective inceptions.

I hope you can make it! We will send out room instructions later this week. If you cannot make it to the LIVE event, it will be recorded and the recording will be available shortly after the webinar has ended.

Also, please be sure to read the Portfolio Rules and Objectives below as we're tweaking some strategies to provide more flexibility in the selection process, to find better entries, and hopefully to improve upon already stellar results.

Upcoming Earnings Report

The following companies will be reporting earnings this week and each is a component of one of our portfolios:

Monday, February 17: None

Tuesday, February 18: None

Wednesday, February 19: GRMN

Thursday, February 20: HEES

Friday, February 21: 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, some of these have just been changed for our February 19th "draft" day (changes for the upcoming quarter are in bold italics):

There are 10 leading stocks from up to 10 leading industries in each portfolio (at the time of selection) - the change here is to allow a second stock within the same industry group
They are held for an entire 90 day period, with no stops in place - there will be NO stops. All stocks will be held for the entire period (members may choose to have stops, but we will not)
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 initially entered into as of the first open after 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)
We will have multiple entries during the historically bearish 19th through 25th - to be announced during the webinar
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 quarter of performance.
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 will buy all 10 stocks in the manner 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:

We saw nice outperformance last week from all portfolios, except the Income. The Aggressive portfolio had an exceptionally strong week.

Weekly Summary

Benchmark S&P 500:

The S&P 500 finished at another all-time closing high last week, rising 1.58% on the week. We did end the week with a negative divergence on the very short-term 60 minute chart, so this upcoming week could be challenging. However, and this is big, the long-term picture couldn't look much stronger with the weekly PPO moving back above 3 to a fresh new high. Momentum is exceptionally strong on the longer-term chart. While the weekly PPO above 3 might look like a very overbought condition relative to the past several years, it's important to realize that weekly PPOs moved above the 5-6 level during our last secular bull market from 1981 to 2000.

I won't spend time today sharing charts from the portfolios as all stocks will be replaced on Wednesday of this week, unless of course, they are re-selected for the next quarter.

Model Portfolio:

The Model portfolio had a strong week, gaining 3.57%. Here's the updated inception-to-date chart of the portfolio:

Here are how the Model portfolio component stocks performed last week:

Aggressive Portfolio:

The Aggressive portfolio had a spectacular week, rising 5.20%. Here's the Aggressive portfolio chart since its inception on May 19, 2019:

Here are how the Aggressive portfolio component stocks performed last week:

Income Portfolio:

The Income portfolio had been our strongest portfolio on a relative basis, but took a week off and gained just 1.22% and trailed 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:

Character Change (CC, formerly Value) Portfolio:

The CC portfolio outperformed for a second straight week, jumping 2.12%. Here is the inception-to-date chart since November 19, 2019:

Here are how the CC portfolio component stocks performed last week:

Summary

Well, we have two more trading days until the next chapter in our portfolios will be unveiled. Earnings season has once again been quite strong over the past several weeks, providing a number of great opportunities for the quarter ahead. For the past quarter, our portfolios have performed solidly, with the Income portfolio extending its lead over the S&P 500. The Income portfolio has risen 10.77% this quarter (November 19th through Friday's close), while the S&P 500 has gained 8.33% over the same time frame. Both the Model and Aggressive portfolios have gained just above 7.50%, slightly trailing the benchmark S&P 500, but considering that the Model portfolio did not own Apple (AAPL), Microsoft (MSFT), Amazon.com (AMZN), etc. - all stocks that carried the cap-weighted S&P 500 higher - performing nearly as well as the benchmark index wasn't bad. As far as the Aggressive portfolio is concerned, it's comprised of small ($SML) and mid cap ($MID) stocks. Those two indices show the following quarter-to-date gains:

S&P 600 Small Cap Index: +3.88%

S&P 400 Mid Cap Index: +4.76%

All of a sudden, the Aggressive Portfolio's gain of 7.53% looks quite solid.

Happy trading!

Tom Bowley, Chief Market Strategist

EarningsBeats.com

"Better timing. Better trades."