EB Weekly Portfolio Report - Sunday, April 11, 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, April 12: None
Tuesday, April 13: None
Wednesday, April 14: None
Thursday, April 15: None
Friday, April 16: 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:
Everything moved higher last week, but we did make up some relative ground vs. the S&P 500 on both our Model and Strong AD portfolios. The Aggressive trailed slightly, while our Income portfolio gave up a bit of its quarterly relative gain.
Weekly Summary
Benchmark S&P 500:
The S&P 500 had another strong week and closed above 4100 just one week after clearing 4000 for the first time in history. The breakout to fresh new highs on Thursday and Friday are very encouraging - and expected considering the time of the year. April is typically a strong month for U.S. equities as we move closer and closer to our next earnings season. JP Morgan (JPM), Wells Fargo (WFC), and Goldman Sachs (GS) will kickstart earnings on Wednesday of this week.
Model Portfolio:
The Model Portfolio surged another 4.29% last week, continuing to make up ground on the S&P 500 this quarter. Here's the updated inception-to-date chart of the portfolio:
Here are how the Model portfolio component stocks performed last week:
ROKU had a strong week and is now trading back above its 20-day EMA, but the work isn't done. Price resistance and the 50-day SMA will both try to keep a lid on ROKU's advance:
One key to watch will be that $DJUSCR:$SPX relative ratio. Computer hardware stocks are beginning to show favoritism again. If that continues, ROKU should find it much easier to clear overhead resistance.
Aggressive Portfolio:
The Aggressive Portfolio tacked on 2.48% last week, slightly trailing the S&P 500's gain for the week. Here's the updated inception-to-date chart of the portfolio:
Here are how the Aggressive portfolio component stocks performed last week:
ATKR underperformed last week, but it appears to me that its 20-day EMA test was a bullish development after a cup-like period of consolidation:
An increasing volume breakout above 75 would measure another 10 points higher to roughly 85.
Income Portfolio:
The Income Portfolio climbed 1.38%, though it trailed 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:
Some might consider COWN in a topping head & shoulders pattern. I would not. This is a leading stock, so I'm not looking for bearish patterns to confirm. COWN needed some short-term selling to unwind its negative divergence and I believe that is now complete:
In the interest of objective technical analysis, I point out this head & shoulders pattern. I'll be surprised, however, if it executes. Always remember that patterns don't matter without execution. Until that neckline is lost with confirming volume, I'd view COWN as a very bullish chart.
Strong AD Portfolio:
The Strong AD Portfolio gained 4.52%, drawing a bit closer to the benchmark S&P 500 for the quarter. 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 could have had a great week last week based on its top 3 performers, but you can see the weakness at the bottom of the group prevented that. SEDG and MGNI are struggling on their daily charts, but remain quite strong overall on their long-term weekly charts. In fact, MGNI has been holding its rising 20-week EMA as follows:
Loss of that 20-week EMA would definitely be more concerning for MGNI. It's obviously quite a volatile stock and is one that could quickly rebound. It's now approximately 4 weeks away from its earnings and I'm hopeful that we'll see the stock strengthen and make a pre-earnings run higher.
Summary
The Dow Jones and S&P 500 have both risen to fresh all-time highs and there've been few signs of slowing down, other than the occasional 60-minute negative divergence. Transports ($TRAN) closed at an all-time high on Friday and $TRAN:$UTIL ratio is rising and very bullish. When we look at consumer stocks, the discretionary vs. staples ratio (XLY:XLP) has also taken a big turn to the upside in the past two weeks. Throw in the return to growth stocks vs. value ratio (IWF:IWD), which has moved up considerably the past two weeks as well and it all adds up to a market that seemingly wants higher prices.
Model ETF Portfolio
Our Model ETF Portfolio gained 0.85% last week, but that trailed the S&P 500's gain by nearly 2 percentage points. Small cap ETFs, making up 25% of our Model ETF Portfolio, struggled as the S&P 600 Small Cap Index ($SML) lost nearly one-half percent last week.
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:
It was a little surprising that ARKW didn't perform a bit better than it did, given that growth stocks returned back to favor. But small caps and mid caps lacking relative strength likely had an impact on ARKW as well.
Happy trading!
Tom Bowley, Chief Market Strategist
EarningsBeats.com
"Better timing. Better trades."