EB Weekly Portfolio Report - Sunday, December 6, 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, December 7: None

Tuesday, December 8: None

Wednesday, December 9: None

Thursday, December 10: None

Friday, December 11: 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 Thursday, November 19th; members may choose to try to time better entries, but EB.com "purchased" as of November 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 1.0%
• 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:

I always review the S&P 500. Today, I want to look at the Dow Jones. It recently cleared 30,000 for the first time in its history and I would not be surprised at all to see 31,000 or even 32,000 before December ends. We are now trending higher and the recent leadership from the weak pandemic stocks is adding to the Dow's strength. Here are the top 10 performers in the Dow over the past month:

Look at the sectors and industry groups. These are the areas that were truly beaten-up during the pandemic. They are now rallying quite feverishly. I can't paint this as anything but bullish. The bears honestly have nowhere left to turn. We are seeing technical strength across nearly every area of the market. Our major indices are at or near all-time highs. Global markets are rallying. Don't try to step in front of this freight train or you'll get run over.

Model Portfolio:

The Model Portfolio gained a very respectable 2.59%, given the rotation to many beaten-down groups. Here's the updated inception-to-date chart of the portfolio:

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

4 of the 10 component stocks gained at least 7.5%, a very strong week. If it weren't for a poor reaction to Zoom's (ZM) quarterly earnings report, the Model Portfolio would have really crushed the benchmark S&P 500. But the ups and downs are to be expected, especially with earnings reports.

After testing its rising 20 day EMA, ALGN has resumed its uptrend, breaking out to a new all-time high:

Short-term price support now resides close to 500.

Aggressive Portfolio:

The Aggressive portfolio rose 0.72%, but fell short of the S&P 500's advance. Here's the updated inception-to-date chart of the portfolio:

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

LASR was a primary laggard a couple weeks ago, but last week's strength carried it to another breakout, a bullish development:

After consolidating, LASR broke out again on big volume and its AD line is accelerating as well. Short-term price support now resides close to 31.60.

Income Portfolio:

The Income portfolio advanced 2.81%, closing the gap on the S&P 500. Here's the updated inception-to-date chart of the portfolio:

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

AMAT is having an awesome quarter for us and its AD line is rising faster than its price. It's also soaring relative to its very strong peer group - semiconductors ($DJUSSC):

Strong AD Portfolio:

The Strong AD Portfolio tumbled 3.71%, losing some of its recent relative strength. Here's the updated inception-to-date chart of the portfolio:

Here are how the Strong AD portfolio component stocks performed last week:

The Strong AD Portfolio performed opposite the Model Portfolio. The Strong AD Portfolio had 4 of its 10 components fall more than 7% and there just wasn't nearly enough strength in other stocks to offset it. The biggest loser last week was clearly NIO, but volatility is to be expected here. NIO had risen from 2.11 in March to 57.20 in November. It had tripled in just the last two months. Big rises are likely to be met with big falls. If you're going to own a stock like NIO, you have to be willing to accept the extreme volatility in both directions. There's a negative divergence in play on NIO's daily chart that could send it down to 35 in the near-term. I also wouldn't be surprised to see the stock hit 70 this quarter. Again, that's the type of volatility you have to be comfortable with to own this one:

The AD line remains powerfully strong. I believe that anyone panicking and selling is playing right into the hands of market makers and institutional investors as they'll gladly buy your shares. However, I think there's a chance NIO sees 35, and even possibly 30, during December before rallying. You'll need a strong stomach to deal with the volatility that I'm expecting to see. Despite this volatility, though, I believe NIO remains one of the best stocks in one of the best industries - automobiles ($DJUSAU).

Summary

The best news of all is that we're seeing wide participation in this latest market advance. That makes me feel particularly bullish. The Pandemic Portfolio that I follow is flying:

This highlights the absolute breakout. Of the 10 industry groups that I included in my Pandemic Index, only Retail REITs ($DJUSRL) have failed to clear their June high. The Pandemic Index has been showing excellent relative strength since the first positive vaccine news was released on November 9th:

That takes away from our portfolios, but overall I'm fairly pleased with how they've held up, despite rotation that would adversely affect them.

Model ETF Portfolio

Our Model ETF Portfolio also maintains a slight edge over the S&P 500, despite unfavorable rotation. The following is an inception-to-date chart of this portfolio with a comparative chart of the S&P 500 in the panel below:

Here are how our Model ETF Portfolio components performed last week:

The difference-maker last week was renewable energy. After a stellar advance throughout November, the PBW saw profit taking emerge last week and that was the primary culprit in our Model ETF's underperformance.

Happy trading!

Tom Bowley, Chief Market Strategist

EarningsBeats.com

"Better timing. Better trades."