EB Weekly Portfolio Report - Sunday, March 14, 2021
ChartWatchers Article
I wrote an article in this weekend's ChartWatchers that was really designed to be very educational, taking a look at inflation and how it's likely to impact stock market performance moving forward. If you didn't have a chance to read it, here's a link:
Rising Inflation: It's Coming, But What Impact Will It Have On US Equities?
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, March 15: VUZI
Tuesday, March 16: FLNT
Wednesday, March 17: None
Thursday, March 18: None
Friday, March 19: 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 Friday, February 19th; members may choose to try to time better entries, but EB.com "purchased" as of February 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:
Our portfolios bounced back strongly, despite both the IWF:IWD (growth vs. value) and QQQ:SPY (NASDAQ vs. S&P 500) relative ratios losing ground again last week.
Weekly Summary
Benchmark S&P 500:
The S&P 500 gained 2.64%, though it was another volatile week. The good news is that both the Dow Jones and the S&P 500 closed at new all-time highs. Small and mid caps did the same. So right now, it's only the tech-laden NASDAQ that's failing to sustain its rally. I believe that's temporary while we're working our way through March. As April earnings season draws near, I would not be surprised to see the NASDAQ joining the other major indices in record high territory.
Model Portfolio:
The Model Portfolio rebounded 5.20%, pulling closer to the S&P 500's performance this quarter. Here's the updated inception-to-date chart of the portfolio:
Here are how the Model portfolio component stocks performed last week:
Aggressive Portfolio:
The Aggressive Portfolio jumped 5.27% as it closes its quarter-to-date gap vs. 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:
Income Portfolio:
The Income Portfolio gained 9.67%, extending its relative outperformance vs. 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:
Strong AD Portfolio:
The Strong AD Portfolio surged 13.15%, crushing the S&P 500 and reversing much of its recent relative losses. Here's the updated inception-to-date chart of the portfolio:
Here are how the Strong AD portfolio component stocks performed last week:
Summary
It was a very good sign to see our portfolios perform so well when there was so little return to growth stocks. I believe it's because we stick with leaders and when growth stocks simply stopped moving lower on an absolute basis, money rotated quickly back to leading growth stocks. I'm hopeful that will continue throughout the balance of the quarter. Here's a chart of the IWF and what I'll be looking at during the upcoming week:
Those two red circles are important and highlight two key questions. First, can we begin to repair the recent damage to momentum? Momentum is negative ANY TIME the PPO is below the zero line, which is exactly where we are now. Second, we're testing two key moving averages - the 20 day EMA and 50 day SMA. Can we move definitively back through both, or do we need more selling first to perhaps establish a double bottom?
Model ETF Portfolio
Our Model ETF Portfolio rebounded nicely, along with our stock portfolios. Monday was a rough day, but the balance of the week turned out to be solid days.
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:
As you can see from the above, all 7 of our ETFs easily outpaced the S&P 500's 2.64% gain last week. We also were able to move back ahead of the S&P 500 for this quarter, +3.93% to +3.80%. Again, considering the move away from growth since January 19th (the start of the Model ETF Portfolio quarter), I believe that performance is quite impressive.
Happy trading!
Tom Bowley, Chief Market Strategist
EarningsBeats.com
"Better timing. Better trades."