EB Weekly Portfolio Report - Sunday, January 17, 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 18: None
Tuesday, January 19: None
Wednesday, January 20: None
Thursday, January 21: None
Friday, January 22: 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:
It was a solid week for our portfolios, although Friday was a disappointing end to the week. January options expiration likely was the culprit for our end-of-week underperformance and it could continue to be an issue in the upcoming week.
Weekly Summary
Benchmark S&P 500:
The S&P 500 struggled to set new highs last week, which shouldn't be viewed too bearishly. We've seen a solid rise since late-October, so profit taking is just a part of this game. Friday's S&P 500 low literally tested the rising 20 day EMA as you can see below:
Model Portfolio:
The Model Portfolio finished 0.21% higher, but easily outpacing the 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:
The best news for the Model Portfolio was ZM closing back above its declining 20 day EMA. That could be the first step to the start of another significant rise in the stock. We'll see. Here's the current technical look:
There are mixed signals near-term. A break above the black-filled candle from Friday and the 50 day SMA would be a very big positive for the stock technically. Also, I will be watching the improving relative strength vs. both ZM's peers and the benchmark S&P 500. I'd like to see that continue. It's also comforting to see ZM hold its prior low in its AD line. While prices were moving lower, ZM actually appeared to see signs of accumulation, which could turn out to be quite bullish.
Aggressive Portfolio:
The Aggressive Portfolio jumped another 3.98%, further distancing itself from the S&P 500. Here's the updated inception-to-date chart of the portfolio:
Here are how the Aggressive portfolio component stocks performed last week:
6 out of 10 components moved lower last week, but that BBBY 35% gain carried the portfolio on its broad shoulders:
I'd like to see the specialty retailers group ($DJUSRS) begin to trend higher relative to the S&P 500. It's also important to point out that BBBY reported its quarterly earnings results less than two weeks ago. Surprisingly, both revenues and EPS came in below expectations. So BBBY will not be a part of our portfolios in the next quarter, despite its strong showing last week.
Income Portfolio:
The Income Portfolio fell 0.03%, but still outperformed the benchmark S&P 500. Here's the updated inception-to-date chart of the portfolio:
Here are how the Income portfolio component stocks performed last week:
AMAT is becoming a dominant player in a very strong semiconductor space ($DJUSSC). It was the glue that held together the Income Portfolio.
Strong AD Portfolio:
The Strong AD Portfolio edged 0.05% higher, stretching its lead over the S&P 500. Here's the updated inception-to-date chart of the portfolio:
Here are how the Strong AD portfolio component stocks performed last week:
I'm a little bitter over the treatment of ENPH last week. I realize it's been a huge winner, but I'm convinced the Friday selling had more to do with options expiration than anything else. Look at the following options table for ENPH:
The far left column represents the open call interest, while the far right column represents open put interest. Until Friday's 8.73% selloff, ENPH had a TON of in-the-money calls with almost zero on the put side. Market makers stole a lot of premium from options holders and took our Strong AD Portfolio down in the process. I wouldn't rule out a trip down to gap support at 181.48.
Summary
Last week's strength came from energy (XLE) and real estate (XLRE), while the sellers picked out a couple of aggressive sectors. Here is last week's sector leaderboard:
My primary signals remain extremely bullish, though I do recognize that selling into, and just after, options expiration week is quite typical. We've rallied mostly into earnings season, so we should at least consider the possibility of "buy on rumor, sell on news".
Model ETF Portfolio
Our next Model ETF Portfolio "draft" will be held on Tuesday, January 19th after the close. It's been a very solid first quarter for this flagship ETF portfolio and I'll be considering current market themes when I announce our next slate of ETFs on Tuesday.
Here's the updated inception-to-date chart of the Model ETF Portfolio:
Here are how the Model ETF Portfolio component ETFs performed last week:
Happy trading!
Tom Bowley, Chief Market Strategist
EarningsBeats.com
"Better timing. Better trades."