EB Weekly Portfolio Report - Sunday, August 16, 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, August 17: None
Tuesday, August 18: JKHY
Wednesday, August 19: NVDA (I incorrectly listed NVDA as reporting last week)
Thursday, August 20: None
Friday, August 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 were changed for our May 19th "draft" day (changes for the May 19 to August 19 quarter are in bold italics):
- We have removed the Character Change portfolio and added a new Strong AD portfolio
- There are 10 leading stocks from up to 10 leading industries in each portfolio (at the time of selection). Generally, there will only be one stock per industry group, but there could be exceptions.
- They are held for an entire 90 day period, with no stops in place. We strive for consistency, transparency, and simplicity in our portfolios. EB.com members may hold these stocks for the entire 90 days, trade them, use stops, etc., but for purposes of our calculation, we will make no exceptions to our "buy and hold for three months" strategy.
- Every stock will generally be held through ONE earnings report
- The expectation is that relative winners will carry the portfolio to outperformance
- They will all be entered into as of the close on Tuesday, May 19th; members may choose to try to time better entries, but EB.com will "purchase" as of May 19th's closing price
- Primary objective is to outperform the benchmark S&P 500
Here are several considerations for EB members:
- I would expect the Strong AD and Aggressive portfolios to be the riskiest, followed by the Model portfolio, and then the Income portfolio
- The Strong AD portfolio will be selected from a combination of rising accumulation/distribution lines and SCTRs above 80 at the time of selection. It is the only portfolio that does NOT require a revenue and EPS beat in its most recent quarterly earnings report
- 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
- I believe the larger drawdown on the Income portfolio last quarter was an anomaly occurring as a result of the pandemic as many defensive, higher-yielding companies uncharacteristically underperformed during a market decline.
- 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.
Weekly Snapshot
Here's a weekly recap:
We saw slight outperformance from our Income Portfolio last week, while the Model Portfolio mostly stood its ground. The Strong AD and Aggressive Portfolios, however, lost ground with the Aggressive Portfolio now trailing the benchmark S&P 500 for the current quarter (May 19th to August 19th).
Weekly Summary
Benchmark S&P 500:
The S&P 500 gained 0.64% last week and ended at 3372.85. Last week's high was 3387.89, which fell just 6 points shy of setting a new all-time high. The highest close ever recorded was 3386.15 on February 19, 2020, so last week's high did threaten that record.
Model Portfolio:
The Model portfolio was relatively flat on the week, gaining 0.16% . 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 ran into weakness last week, especially on Monday and Tuesday, and finished with a 1.55% weekly loss. 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 rose by 1.03% last week, beating the S&P 500 for the second consecutive week. Here's a look at the inception-to-date chart:
Here are how the Income portfolio component stocks performed last week:
Strong AD Portfolio:
The Strong AD Portfolio dropped 2.34%, and now leads the benchmark S&P 500 by less than 2 percentage points in its inaugural quarter. Here's a look at the inception-to-date chart:
Here are how the Strong AD portfolio component stocks performed last week:
Summary
Overall it's been a fairly solid quarter, especially with our Model Portfolio. Barring an unforeseen collapse in the next three days, the Model Portfolio should handily beat the S&P 500, marking its 6th successful quarter vs. that benchmark index since its inception November 19, 2018. The only quarter that the Model Portfolio failed to keep pace with the benchmark was the quarter August 19th through November 19th of 2019. This upcoming quarter in 2020 does present additional challenges as half the quarter resides squarely in August and September, the two worst months historically for U.S. equities. Here's a seasonal chart of the S&P 500 for the past 20 years to give you an idea of the battle ahead:
Currently, I'm considering the pros and cons of holding a basket of growth stocks for the next three months. Will the next 3 months favor cyclical stocks? Is the recent relative strength in basic materials the real deal after 9 years of relative weakness? Of course, that last question depends a great deal on whether the dollar selloff since mid-March continues. All of these questions will be considered as we approach another exciting "DRAFT DAY" on Wednesday, August 19th at 5:30pm ET. Mark your calendars and be sure to grab a seat. We'll send out room instructions on Wednesday.
In the meantime.....
Happy trading!
Tom Bowley, Chief Market Strategist
EarningsBeats.com
"Better timing. Better trades."