EB Weekly Portfolio Report - Sunday, April 26, 2020
Upcoming Earnings Reports
According to Zacks.com, the following companies will be reporting earnings this week and each is a component of one of our portfolios:
Monday, April 27: OMF
Tuesday, April 28: GOOGL, AMD, DXCM, MSCI, CERN
Wednesday, April 29: MSFT, TSLA, VRTX, CCS
Thursday, April 30: AAPL, AMZN, SGEN, GNRC
Friday, May 1: ABBV
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 were just changed for our February 19th "draft" day last week (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 were all entered into as of close on February 19th
- We decided against having multiple entries for our purposes, but members were encouraged to enter based on whatever felt most comfortable
- 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's strategy and composition was changed a bit in it second quarter, as we decided to include companies that have broken out of a consolidation range, not just those with breakaway gaps to end a downtrend
- 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 below to gain an idea of the 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:
The Model and Aggressive portfolios added more distance between their performance since inception and that of the benchmark S&P 500 with overall strength, but relative weakness once again prevailed in the Income portfolio.
Weekly Summary
Benchmark S&P 500:
The S&P 500 fell 1.32% last week to end its two week winning streak. Still, the rally off the March 23rd lows remains in force as price action nears a key 20 week EMA:
This chart looks strikingly similar to the pain we endured in 1987 in terms of the false breakdown and recovery:
The primary difference is that the 2020 recovery has been far more rapid. That's a very encouraging development in 2020, in my opinion. That, combined with the huge signals of massive accumulation throughout this rally, tells me the worst is behind us. Could we have another selling episode? Of course. It's hard to imagine there not being a rocky road ahead, especially in the short-term with many uncertainties still surrounding us. But I sense that professionals accumulated in a big, big way during the first half of March and those are not weak hands. Time will tell, but don't be shocked if all-time highs on the S&P 500 are much closer than anyone could possibly have imagined.
Model Portfolio:
The Model portfolio enjoyed another solid week, rising 1.29%, and is now outperforming the S&P 500 by almost 50 percentage points in 1 1/2 years. Here's the updated inception-to-date chart of the portfolio:
Here are how the Model portfolio component stocks performed last week:
CMG's solid performance came on the heels of solid quarterly results, where the company beat its revenue estimate and crushed its EPS estimate (3.08 vs 2.50).
Aggressive Portfolio:
The Aggressive portfolio easily beat the S&P 500 last week, gaining 2.46% . Here's the Aggressive portfolio chart since its inception on May 19, 2019:
Here are how the Aggressive portfolio component stocks performed last week:
The Aggressive portfolio's two internet stocks - EVER and CDLX - headed in completely opposite directions last week. Fortunately, the strength in EVER more than offset the weakness in CDLX. SGEN continued to benefit from a very strong biotech group and its relative strength among its biotech peers.
Income Portfolio:
The Income portfolio dropped 3.42% last week, falling further from its benchmark, 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:
As you can see from the above, there was little strength to be found in this portfolio. Meanwhile, a few of the weakest component stocks added to their misery. AON, in particular, is hoping it found short-term price support after its 8.00% drop last week:
The accumulation/distribution line on AON is actually quite strong, so I'm expecting support in the low-170s to hold this week. We'll see.
Character Change Portfolio:
The CC portfolio lost 0.40% last week, but that did manage to narrowly outpace the S&P 500. Here is the inception-to-date chart since November 19, 2019:
Here are how the CC portfolio component stocks performed last week:
The biggest surprise here was CRL, which fell 5.54% last week even though biotechs fell just 0.51%. If there's a silver lining, it's that CRL printed a hammer on Friday at its 20 day EMA after trading at a 2 week low intraday:
Summary
Earnings season is kicking into full gear and this upcoming week will be HUGE for our portfolios. FIFTEEN of our 38 portfolio component stocks (there are 40 companies in our portfolios, but two companies - AAPL and AMZN - are in two portfolios each) will be reporting their quarterly results this week and how the stock market reacts to those reports will likely shape the next 3-4 weeks of portfolio performance. I would expect solid earnings reactions to those companies that are showing relative strength and uptrending accumulation/distribution lines.
Happy trading!
Tom Bowley, Chief Market Strategist
EarningsBeats.com
"Better timing. Better trades."