EB Weekly Portfolio Report - Sunday, January 3, 2021
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, January 4: None
Tuesday, January 5: None
Wednesday, January 6: None
Thursday, January 7: BBBY
Friday, January 8: 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:
Buyers were out last week, as they usually are between the Christmas and New Years holidays, but most of our portfolio stocks were overlooked as we saw profit taking to close out the year.
Weekly Summary
Benchmark S&P 500:
The S&P 500 continued to the upside unabated last week, rising close to 1.5% on the week and rising 3 of the 4 trading days. My analysis suggests that stocks are being accumulated, not distributed. So while we could certainly see a period of selling or consolidation at any time, I'd expect to see it rather short-lived as prices move higher into record territory in Q1 2021. Energy (XLE) was the only sector to finish in negative territory for the week, although we did see lagging performance from technology (XLK) and industrial (XLI) stocks.
Model Portfolio:
The Model Portfolio fell 2.06%, marking its second straight week of underperforming the benchmark S&P 500. Here's the updated inception-to-date chart of the portfolio:
Here are how the Model portfolio component stocks performed last week:
Another solid week in TSLA wasn't enough to offset further selling in ZM and profit taking in both ROKU and YETI. If the Model Portfolio is to bounce back in early 2021, it may have to do so without help from TSLA. The negative divergence here is troublesome near-term, especially if that rising 20 day EMA support fails to hold on any short-term selling:
TSLA remains one of the best companies in the world, according to Wall Street, which is great news. And negative divergences do not guarantee us of weakness ahead. However, it does alert us to the fact that risk is greater. These divergences can result in PPO centerline and 50 day SMA tests. In TSLA's case, it could suggest a 15%-20% pullback ahead, no guarantee. We HOLD our stocks in our portfolios for the full 90 days, but divergences can play a role in how traders view a stock and the inherent risk associated with that stock. TSLA has been an unbelievable performer, I'm just trying to remain objective given its current technical state. The flip side is that negative divergences can be eliminated by a sudden momentum surge to the upside.
Aggressive Portfolio:
The Aggressive Portfolio lost 3.53%, essentially giving back its gains from the prior week. Here's the updated inception-to-date chart of the portfolio:
Here are how the Aggressive portfolio component stocks performed last week:
Renewable energy ($DWCREE) and software ($DJUSSW) were both losers last week, especially the former, which lost 6.67% and was easily the worst performing industry group. This relative underperformance took a toll on our Aggressive Portfolio as SPWR and NET both lost 10% or more. PINS suffered as internet stocks also finished in negative territory. Like I said earlier, many strong areas and stocks saw profit taking last week, so there was no getting around it in our portfolios.
Income Portfolio:
The Income Portfolio climbed 1.10%, trying to keep pace with the benchmark 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:
SBUX was the outlier here, gaining a very respectable 4.87% on the week. The following chart shows excellent relative strength for SBUX as we begin a brand new trading year and also illustrates the importance of buying strong stocks on 20 day EMA tests:
Strong AD Portfolio:
The Strong AD Portfolio tumbled 3.03%, losing ground to the S&P 500 for one of the few times in recent weeks. Here's the updated inception-to-date chart of the portfolio:
Here are how the Strong AD portfolio component stocks performed last week:
Profit taking crushed this portfolio last week, but we can't expect to annihilate the S&P 500 every week. Profit taking is to be expected and UPWK, PTON, ETSY, and ENPH all have had tremendous runs in Q4. I'm willing to give this group a pass near-term.
Summary
As I look back, I have so many mixed emotions about 2020. I'm so thankful and blessed for the support from our entire EarningsBeats.com community. It's been overwhelming and I cannot begin to tell you how much we appreciate it. Obviously, the COVID-19 pandemic has taken a toll on all of us in so many ways. I pray that each of you and your families are safe heading into 2021 and remain that way until we can navigate our way to the other side.
I'm very hopeful regarding the financial markets in 2021. We ended 2020 on a very high note with our major indices at or very near all-time highs. The secular bull market that I've discussed ad nauseum remains beautifully intact and sets us up for another strong year, despite all the continuing non-believers and critics. The Volatility Index ($VIX) is at 22.75, proof of the fear that remains heading into the new year.
I look for a very strong year on the S&P 500 with the potential for a 1000 point gain to perhaps 4700-4800. It won't be without heartache at times, so hopefully we'll be able to spot the short-term weakness before it hits, similar to early-September 2020. That's not always the case, but we'll have our eyes wide open, hoping to spot it.
Of course, we'll keep you informed of it all throughout the year. Again, I want to thank all of you for your support. Together, we're making a difference.
HAPPY NEW YEAR!
Happy trading!
Tom Bowley, Chief Market Strategist
EarningsBeats.com
"Better timing. Better trades."