EB Weekly Portfolio Report - Sunday, May 30, 2021

Tom Bowley - May 30, 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 31: None

Tuesday, June 1: None

Wednesday, June 2: None

Thursday, June 3: None

Friday, June 4: 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, May 19th; members may choose to try to time better entries, but EB.com "purchased" as of May 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 70 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.
Large drawdowns last quarter were due to the rapid rotation from growth stocks to value stocks; each quarter, our portfolios are based on themes and there is never a guarantee that our analysis and beliefs will be proven correct
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 strong week across the board. U.S. indices were mostly higher and our portfolios mostly outperformed the benchmark S&P 500. It's worth noting that many of the industry groups that struggled the most during the early stages of the pandemic (our "Pandemic Index"), had a solid week.

Weekly Summary

Benchmark S&P 500:

It was a fairly quiet week where we saw the S&P 500 gain slightly more than 1%. You may not have realized it, but the Volatility Index ($VIX) tumbled nearly 17% last week as fear evaporated following options expiration week. And with growth stocks outperforming value stocks, it's as if market participants completely forgot about the inflationary CPI and PPI reports earlier in May. I view it as playing out exactly as I've discussed. I believe Wall Street will use the inflation hype to accumulate growth names throughout the summer. Pay attention to the "under the surface" signals to keep an eye on what Wall Street is doing with their money. Pay little attention to what they say.

Model Portfolio:

The Model Portfolio gained 2.93%, a sizable level of outperformance vs. the benchmark. Here's the updated inception-to-date chart of the portfolio:

Here are how the Model portfolio component stocks performed last week:

GNRC had a very strong week and moved through both its 20-day EMA and 50-day SMA. But it is still consolidating for now. The chart below shows the two critical price resistance levels necessary to clear to begin a new uptrend:

Ultimately, 363.47 is the closing resistance. GNRC still has a bit of room to get there. Before it does, it must negotiate a shorter-term resistance level at 338.11. GNRC had two intraday moves above 340 over the past few months, but hasn't been able to close above it. Therefore, the very first indication of a possible renewal of the prior GNRC uptrend would be a close over 340.

Aggressive Portfolio:

The Aggressive Portfolio climbed 2.00%, trying to put last quarter's relative weakness to bed. Here's the updated inception-to-date chart of the portfolio:

Here are how the Aggressive portfolio component stocks performed last week:

SBH has been mired in a bout of profit taking since its quarterly earnings were released. I believe the current price down to perhaps 20-21 represents a solid entry zone:

While not reflected on the above chart, it's worth noting that SBH has an RSI close to 50 right now. The 40-50 area on the RSI tends to represent a solid entry point for an uptrending stock.

Income Portfolio:

The Income Portfolio closed up 0.28%, trailing the S&P 500 by nearly a percentage point. Here's the updated inception-to-date chart of the portfolio:

Here are how the Income portfolio component stocks performed last week:

CVS is classified as a pharmaceutical at StockCharts.com, though I'd view it as a drug retailer ($DJUSRD). While CVS had a rough week relative to the S&P 500, it simply performed along with its peers as the DJUSRD fell 3.72% last week.

Strong AD Portfolio:

The Strong AD Portfolio jumped 3.00%, easily picking up ground on 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:

VUZI had a great week last week, but I didn't like its reversal on Friday from a short-term trading perspective:

I believe an excellent support level has now been established on VUZI close to 13.75. I don't know if VUZI will return to that level, but from a short-term trading perspective, I'd expect it to be rangebound in that 13.75-19.25 area. This one will be very volatile and not for everyone, but I do see a ton of potential upside later in this quarter, assuming that 14 support holds.

Summary

Our first full week with our new portfolios turned out to be a decent one. We did underperform on the Income Portfolio, but the other three got back on track. After a quarter in which we trailed the S&P 500 throughout (except for the Income Portfolio), it was nice to see outperformance for a change. There are still many hurdles ahead and many question marks remain. I'll continue to monitor key developments, indicators, and sentiment readings, including, but not limited to, the relative performance of growth vs. value, the QQQ vs. the SPY, sector relative performance, divergences, and the correlation between the VIX and the S&P 500 (positive correlation can be problematic for the market short-term).

Model ETF Portfolio

Our Model ETF Portfolio rose 1.27%, edging the S&P 500's gain 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:

Happy trading!

Tom Bowley, Chief Market Strategist

EarningsBeats.com

"Better timing. Better trades."