EB Weekly Portfolio Report - Sunday, June 6, 2021

Tom Bowley - June 06, 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, June 7: None

Tuesday, June 8: None

Wednesday, June 9: None

Thursday, June 10: None

Friday, June 11: 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:

Weakness in SBH and ENPH shares accounted for the Aggressive Portfolio's underperformance last week. Otherwise, our portfolios had a solid week, especially our Strong AD Portfolio, where 5 of our 10 component stocks gained from 4% to 9% last week.

Weekly Summary

Benchmark S&P 500:

It was another very interesting week in the market - aren't they all? Last week, though, the bears had another opportunity to take down the growth stocks as the group was challenging major relative support on the IWF:IWD near 1.54-1.55. They bounced again with a few major growth winners from 2020 like ZM, DOCU, and MDB leading the way. I've stated on many occasions to keep an eye on that IWF:IWD ratio and that has never been more important than the upcoming 1-2 weeks. We're in the third month of a calendar quarter, which can be quite challenging for the stock market, especially growth stocks. Throw in the May CPI and PPI data coming out, along with the 2-day Fed meeting and it's fairly easy to see why we need to monitor this ratio:

This is such a great chart to visualize what's taken place in U.S. equities since the pandemic began. If the inflation data is as bad as I believe it will be and growth stocks are able to hold up above that key relative support level, the worst may very well be behind this area of the market.

Model Portfolio:

The Model Portfolio gained 0.72%, edging the S&P 500 last week. Here's the updated inception-to-date chart of the portfolio:

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

FDX struggled a bit last week, but that may have been linked to the slowing momentum, as evidenced by a slight negative divergence that recently printed. I see plenty of support that is likely to encourage buyers if its short-term selling continues into next week:

Aggressive Portfolio:

The Aggressive Portfolio dropped 0.78%, losing some ground to 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:

SBH had a rough week as buyers were on strike. It's worth noting that specialty retailers ($DJUSRS) turned lower after failing at its declining 20-day EMA. Also, one of its competitors Ulta Beauty (ULTA) had a similar week. My point here is that SBH was following many of its peers to the downside. Still, it did lose a key gap support level. Here is what I'd keep an eye on technically:

Income Portfolio:

The Income Portfolio closed up 1.05% for the week, slightly outperforming 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:

After months of poor relative performance and weak AD lines, ORCL seems to have turned things around. The AD line is finally moving higher and relative strength is quite obvious:

Strong AD Portfolio:

The Strong AD Portfolio jumped 3.22%, extending its lead over the benchmark S&P 500 this quarter. Here's the updated inception-to-date chart of the portfolio:

Here are how the Strong AD portfolio component stocks performed last week:

While it didn't have the biggest gain for the week, I do believe DBX had the biggest breakout:

Summary

Overall, I see few problems with U.S. equities. We are moving into the summertime when we tend to see weaker performance, but the charts continue to paint a very bullish picture. There's no doubt the next couple weeks could be dicey with May inflation reports looming and with another Fed meeting in 10 days. I don't see inflation as a long-term problem at all, however, so it's just whether market participants choose to ignore the headline numbers, which will be very startling. We saw three consecutive heavy days of selling in May leading up to the April inflation data. We can't be sure that we won't see a repeat of that.

There are ways to tell if the stock market is truly spooked by inflation data or whether it's just one more opportunity for market professionals to accumulate while retail traders panic. I'll be discussing some of those signals at our special event on Monday, "Preparing for Shocking Inflationary Data". It will begin at 4:30pm ET and, as always, we'll record the event for those unable to make it live.

Model ETF Portfolio

Our Model ETF Portfolio rose 0.93%, edging the S&P 500's 0.61% 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."