EB Weekly Portfolio Report - Sunday, August 23, 2020
Note
I'll be unavailable most of this weekend, so I'm sending out Sunday's Weekly Portfolio Report a couple days early. Enjoy your weekend!
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 24: None
Tuesday, August 25: None
Wednesday, August 26: None
Thursday, August 27: None
Friday, August 28: 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 our portfolios:
- 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 were all entered into as of the close on Wednesday, August 19th; members may choose to try to time better entries, but EB.com will "purchase" as of August 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 at the beginning of the pandemic was an anomaly, occurring 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:
Weekly Summary
Benchmark S&P 500:
The benchmark S&P 500 finally reached a new all-time high last week, closing on Tuesday at 3389 to eclipse the high set on February 19, 2020 at 3986. The Tuesday high close was then cleared on Friday as the S&P 500 ended the week at 3397. We're still waiting on that first intraday move above 3400. Friday's intraday high was 3399.96. perhaps we'll see that new milestone met next week.
Leadership came in many forms, but the following weekly recap from our Industry Group Relative Strength ChartList (available for download for all of our annual members that are also at least Extra members at StockCharts - contact us at "[email protected]" if you have any questions or would like to upgrade to annual membership to save money and to receive this ChartList) shows that many of our favored industries once again led the action:
Autos ($DJUSAU), computer hardware ($DJUSCR), and home construction ($DJUSHB) were the Top 3 industry groups last week.
Model Portfolio:
The Model portfolio gained another remarkable 7.07% last week, further distancing itself from the benchmark S&P 500. Here's the updated inception-to-date chart of the portfolio:
Here are how the "new" Model portfolio component stocks performed last week (the "old" Model portfolio component stocks contributed through Wednesday's close and then were replaced by the "new" Model portfolio stocks):
Aggressive Portfolio:
The Aggressive portfolio jumped 2.76%, but most of that gain was attributable to the "old" portfolio. Here's the Aggressive portfolio chart since its inception on May 19, 2019:
Here are how the new Aggressive portfolio component stocks performed last week:
Income Portfolio:
The Income portfolio rose by 0.98%, also beating the S&P 500. Here's a look at the inception-to-date chart:
Here are how the new Income portfolio component stocks performed last week:
Strong AD Portfolio:
The Strong AD Portfolio surged 3.97%, easily surpassing the S&P 500's 0.72% gain. Here's a look at the inception-to-date chart:
Here are how the new Strong AD portfolio component stocks performed last week:
Summary
Last quarter's portfolio performance was outstanding. Our quarterly returns were as follows:
Model: +35.33%
Aggressive: +18.18%
Income: +11.33%
Strong AD: +19.35%
The S&P 500 gained 15.46%, so it was clearly an excellent quarter to invest in U.S. equities. While it's unreasonable to expect that the upcoming quarter will generate returns like last quarter, I do believe that growth is likely to remain in favor and I continue to believe that we are still in the early innings of a very lengthy secular bull market. There is no doubt that we'll see a selloff of some magnitude this quarter and it'll likely coincide with the bearish summer months of August and/or September. We cannot expect that stocks will rise unabated, but any short-term selloff will set up beautifully for a Q4 rally, in my opinion.
Stay the course.
Happy trading!
Tom Bowley, Chief Market Strategist
EarningsBeats.com
"Better timing. Better trades."