EB Weekly Portfolio Report - Sunday, May 9, 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, May 10: VUZI, FLNT, MGNI
Tuesday, May 11: None
Wednesday, May 12: SONO
Thursday, May 13: None
Friday, May 14: 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:
It was another very poor week for growth stocks and we saw several negative earnings reactions to portfolio stocks that weighed on performance. The Income Portfolio, which has much less exposure to growth stocks, performed extremely well last week, extending its lead over the benchmark S&P 500 last week.
Weekly Summary
Benchmark S&P 500:
It was another solid week for the benchmark S&P 500 last week, but it remains the tale of two markets. Value stocks pummeled growth stocks last week as more than a thousand companies reported their quarterly results. Many growth stocks reported excellent quarters, but right now Wall Street doesn't seem to care. The best way to visualize this major preference of value stocks is to review the growth vs. value ratio (IWF:IWD):
Looking at the bottom panel, it looks like nothing changed as the S&P 500 simply continued pushing higher. Under the surface, however, was the significant rotation from growth to value stocks.
Model Portfolio:
The Model Portfolio fell 3.67% last week, losing further ground to 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:
PTON was the big drag last week as the company announced it was recalling ALL of its treadmills over safety concerns. It also reported earnings late in the week and bounced initially, only to see further selling (black candle):
The 97.00-98.00 level served as very solid support for many months, so now that level becomes MAJOR price resistance. The declining 20-day EMA, currently at 99, will make that resistance doubly difficult on any short-term price strength.
Aggressive Portfolio:
The Aggressive Portfolio stumbled 1.45% last week, also losing further ground to the benchmark. Here's the updated inception-to-date chart of the portfolio:
Here are how the Aggressive portfolio component stocks performed last week:
SHAK and IRBT both were hit hard after reporting quarterly results. On the opposite end of the spectrum, ATKR crushed revenue and EPS guidance, raised guidance, and its stock price surged:
ATKR has been a solid performer this quarter, but unfortunately, we haven't had enough of these to offset the poorly-performing growth stocks.
Income Portfolio:
The Income Portfolio surged 5.23%, increasing its relative outperformance for the quarter. Here's the updated inception-to-date chart of the portfolio:
Here are how the Income portfolio component stocks performed last week:
9 of 10 Income Portfolio stocks rose last week, led by a HUGE advance in STLD:
STLD benefited more from industry strength than it did from its own relative strength vs. its steel peers. It's been a very solid performer relative to its peers, but it hasn't been able to break above the relative tops that printed in the first quarter.
Strong AD Portfolio:
The Strong AD Portfolio was crushed 6.36%, hurt by very negative reactions to earnings reports. Here's the updated inception-to-date chart of the portfolio:
Here are how the Strong AD portfolio component stocks performed last week:
VUZI, MGNI, and FLNT report quarterly results on Monday, so we should expect more fireworks this week for our beaten-down Strong AD Portfolio. Last week, SEDG was hit hard after missing its EPS estimate by one penny, $.98 vs. $.99. It seems excessive, but renewable energy ($DWCREE) and growth stocks have been under considerable selling pressure, so SEDG was hit twice as hard:
SEDG is in a down channel and its best hope short-term would likely be an oversold bounce to move up and challenge its declining 20-day EMA. Also, gap resistance near 240 - created from its earnings reaction - is a possible short-term target as well.
Summary
The Income Portfolio has been a clear exception, but our three growth-based portfolios have been hurt badly. It's been particularly painful in these three portfolios as the breakdown in the IWF:IWD ratio literally took place just one day after our latest portfolio selections back on February 19th. I'm definitely looking forward to our next draft in 10 days as most areas in the stock market are now quite healthy.
From our Earnings Reactions spreadsheet analysis, technology (XLK) has produced the worst earnings reactions since April 14th. That weakness has been felt quite considerably throughout our portfolios. Even the Income Portfolio's lone technology stock - Lam Research (LRCX) - has struggled despite reporting blowout results and raising guidance.
Model ETF Portfolio
Our Model ETF Portfolio gained 1.93% last week, outperforming the S&P 500.
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:
The technology ETF lagged, but the other 7 ETFs outperformed.
Happy trading!
Tom Bowley, Chief Market Strategist
EarningsBeats.com
"Better timing. Better trades."