EB Weekly Portfolio Report - Sunday, April 18, 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 19: STLD
Tuesday, April 20: None
Wednesday, April 21: LRCX, SNBR
Thursday, April 22: SNAP, EWBC
Friday, April 23: 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 his/her 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:
Options expiration week proved to be too much to overcome, especially on a few stocks in the Strong AD Portfolio. Overall, our performance was weak, but most of that weakness centered around the Strong AD Portfolio. 5 of our 40 portfolio stocks will report quarterly results in the upcoming week. Ultimately, earnings results will determine whether we can begin to make up some or all of the underperformance we've experienced quarter-to-date.
Weekly Summary
Benchmark S&P 500:
The S&P 500 has begun this quarter as it does most quarters - by climbing. I've posted recently that the first 45 days of a quarter tend to be much stronger than the last 45 days and that pattern is holding true to form currently. The S&P 500 has reached 70 RSI on its weekly chart and that generally signals that a period of selling, or at least consolidation, is likely just around the corner. For now, however, there are blue skies ahead.
Model Portfolio:
The Model Portfolio advanced 0.12% last week, but lost ground to 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:
SNBR lost much of its ground on Monday of last week, as it now trades close to key price support near 120:
SNBR is part of a very strong furnishings group ($DJUSFH) and was a leader at the time it set its price high back in early March. It's lost relative strength as it's consolidated the past 5-6 weeks, but with earnings coming up on Wednesday, it'll have a chance to re-establish its leadership role.
Aggressive Portfolio:
The Aggressive Portfolio lost 0.92% last week, trailing the S&P 500 by more than 2 percentage points. Here's the updated inception-to-date chart of the portfolio:
Here are how the Aggressive portfolio component stocks performed last week:
It's fairly obvious which stocks cost the Aggressive Portfolio last week. The subtle move lower in AMKR actually wiped out the little net in-the-money call premium on the table. Meanwhile, PINS' 11% decline wiped out a TON of net in-the-money call premium. Market makers saved themselves a bundle on PINS and it could continue into early this week. I'd look for a rebound in PINS at some point later in the week ahead, however. Here's the current technical view:
PINS is simply consolidating and last week's late drop from 90 to 76 meant a lot from an options perspective, but little in the long-term picture.
Income Portfolio:
The Income Portfolio climbed 1.02%, and was the only portfolio to stay close to the S&P 500 last week. Here's the updated inception-to-date chart of the portfolio:
Here are how the Income portfolio component stocks performed last week:
MGA gapped up earlier in the week and appears poised for a further advance in the days ahead:
MGA is in a powerful uptrend, but the slope of this uptrend cannot continue for much longer. However, until it breaks, we have to assume it continues.
Strong AD Portfolio:
The Strong AD Portfolio fell 5.42%, losing all it had gained in the prior week, while trailing the S&P 500 by a wide margin in the process. Here's the updated inception-to-date chart of the portfolio:
Here are how the Strong AD portfolio component stocks performed last week:
VUZI took a huge hit last week and I'd be shocked if it were due to anything other than options. Before it fell precipitously last week, there were a LOT of in-the-money calls with much premium at stake. Check this out:
The left column shows the total call open interest at each strike price, while the far right column highlights the total put open interest. When VUZI opened the week, nearly all these calls were in-the-money, with few puts in-the-money. By week's end, however, it had totally flipped. There were nearly an equal number of in-the-money calls and puts, eliminating the net in-the-money call premium. Like PINS, I'd look for VUZI to rebound at some point during the week ahead.
Summary
We continue to power ahead into all-time record-high territory. It's not just U.S. equities, either. The German DAX ($DAX) opened 2021 by closing at an all-time high and the bullishness has been growing ever since. I expect a 5% global correction at some point, but it might have to wait until earnings season has come and gone. This past week marked our first week of earnings season and many financial companies knocked it out of the park. For instance, JP Morgan (JPM) posted earnings of $4.50 vs. its $3.05 estimate. Goldman Sachs (GS) posted earnings of $18.60, blowing away its $9.79 estimate. As we see earnings beats like these roll in, it's hard to imagine the stock market taking much of a hit.
Model ETF Portfolio
Our Model ETF Portfolio gained 0.93%, trailing the S&P 500 gain of 1.37%.
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:
All 7 ETFs finished higher last week, but only HACK was able to outperform the benchmark S&P 500. So while it wasn't a bad week, there simply wasn't enough individual relative strength to gain ground on the S&P 500 for the week.
Happy trading!
Tom Bowley, Chief Market Strategist
EarningsBeats.com
"Better timing. Better trades."