EB Weekly Portfolio Report - Sunday, December 13, 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 14: None
Tuesday, December 15: None
Wednesday, December 16: None
Thursday, December 17: FDX
Friday, December 18: 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:
Last week I had pointed out in the DMR that the S&P 500 could see short-term weakness of up to 2-3% and that the rising 20 day EMA would be a near-term test for the current rally. The good news is that we approached that 20 day EMA and quickly bounced off of it:
While anything is always possible, I believe the greatest odds suggest that we'll continue to hold the rising 20 day EMA and that we'll rally - as we typically do - during the second half of December.
Model Portfolio:
The Model Portfolio gained a very respectable 2.80% last week and has now achieved a very significant milestone - gaining more than 200% since its 11/19/18 inception. Here's the updated inception-to-date chart of the portfolio:
Here are how the Model portfolio component stocks performed last week:
Our portfolios don't usually rise because EVERY stock goes higher. As we state on our website, these portfolios historically do well because 2 or 3 components - and we don't know which 2 or 3 - carry the rest of the portfolio. As you look at last week's performance, that point is driven home. 5 of our Model portfolio stocks lost more ground than the S&P 500. But you can see 4 of our component stocks provided tremendous leadership that lifted the overall portfolio.
This week will be a big one for FDX as they report their quarterly results on Thursday. Technically, I believe the stock is poised for another rally off earnings if they can "deliver" better-than-expected results and provide solid guidance. Here's the current chart:
One thing I find very encouraging here is the fact that FDX has continue to perform well relative to its peers, despite mostly consolidating the past several weeks.
Aggressive Portfolio:
The Aggressive portfolio rose 0.73%, outperforming the benchmark S&P 500 index. Here's the updated inception-to-date chart of the portfolio:
Here are how the Aggressive portfolio component stocks performed last week:
DSKE had a rough week last week. Resistance near 7 has proven to be quite difficult, but there's reason to believe we'll bounce after last week's selling:
If DSKE fails to hold onto closing support at 5.85, then I'd be more concerned of a further short-term drop. The bottom of gap support resides at 5.19. That level comes into play if 5.85 fails to hold.
Income Portfolio:
The Income portfolio fell 1.50%, hurt by a big Friday drop in one of its component stocks. Here's the updated inception-to-date chart of the portfolio:
Here are how the Income portfolio component stocks performed last week:
Apple (AAPL) announced on Friday that it was moving away from QCOM's chips and instead providing them in-house. It's obvious that Wall Street would not like that news and QCOM sold off hard. While the selling was unexpected, there's hope for a rebound off the key support zone shown below:
Sellers are currently in charge on QCOM, so we have to be somewhat realistic and objective when we look to potential targets in the very near-term. I see price support, the bottom of gap support, the 50 day SMA, and channel support all in the wide range from 128.42-139.51. While QCOM could certainly turn back higher from Friday's close at 144.28, I think the more likely scenario involves a further short-term price drop into the range I just provided. One signal to watch would be the AD line and whether we can hold onto 4 month support there.
Strong AD Portfolio:
The Strong AD Portfolio rebounded 3.04% after a difficult prior week. Here's the updated inception-to-date chart of the portfolio:
Here are how the Strong AD portfolio component stocks performed last week:
ETSY has been an excellent performer for us and the Strong AD Portfolio, and I expect we'll see this strength continue:
Summary
We remain very proud of our portfolio performance overall since each was started at various points over the past two years. Beating the S&P 500 is a daunting task, as just about every investment professional would tell you. We've established a very strong track record in that regard and we certainly hope the portfolios continue to shine.
We're approaching the Santa Claus rally and the dates of this rally vary based upon who you listen to. From a purely historical and factual perspective, the second half of December is better than the first half:
December 1-15: +1.14%
December 16-31: +35.75%
Those are the S&P 500 annualized returns for each half of December since 1950. So please keep in mind that we have yet to even begin one of the most bullish periods of the year.
While December 21-24 tends to be extremely bullish, I usually refer to the Santa Claus rally as the period between Christmas (December 25th) and New Years (January 1). The annualized return of this December 26-31 period is very strong at +41.92%.
Model ETF Portfolio
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:
Our Model ETF Portfolio outperformed the S&P 500 last week, thanks in large part to the strong performance in IBUY, the online retail ETF. Since we announced our Model ETF Portfolio on October 19, 2020, it's risen slightly more than 1% more than the benchmark.
Happy trading!
Tom Bowley, Chief Market Strategist
EarningsBeats.com
"Better timing. Better trades."