EB Weekly Portfolio Report - Sunday, June 13, 2021

Tom Bowley - June 13, 2021

Spring Special

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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 14: None

Tuesday, June 15: ORCL

Wednesday, June 16: None

Thursday, June 17: None

Friday, June 18: 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:

The S&P 500 moved to new highs and 3 of our 4 portfolios outperformed, though barely.

Weekly Summary

Benchmark S&P 500:

I was nervous heading into last week, mostly because the market prepped for the April CPI and PPI reports in very cautious fashion. We had three days of fairly steep selling in May as this inflation data was being released, showing the highest year over year levels in inflation since 2008. The big question for me heading into last week was whether we'd continue to see that type of cautious market behavior as the May CPI and PPI data was released. Well, we've seen the answer, at least initially, as the S&P 500 pushed to new all-time highs after the CPI was released. The PPI is due out on Tuesday and the 2-day Fed meeting will conclude at 2pm Wednesday with the Fed's latest policy statement.

Model Portfolio:

The Model Portfolio climbed 0.89%, outperforming 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:

SCHW saw some profit taking last week as the 10-year treasury yield fell back, despite higher inflationary pressures. I see short-term issues with SCHW as it consolidates, but I wouldn't be worried longer-term as long as price and channel support near 68 holds.

Aggressive Portfolio:

The Aggressive Portfolio edged up 0.96%, beating the S&P 500 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:

ELY saw a slight ding in its technical picture last week as it gapped down beneath its 20-day EMA. It was the first time this has happened to ELY since it broke out in early May. Heavy volume accompanied the selling, but it did finish with a hollow candle, so despite the selling, the AD line actually moved close to another high:

Income Portfolio:

The Income Portfolio fell 0.76%, slightly underperforming 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:

K has pulled back to a key area where I'd expect to see absolute strength resume. I like big hollow candles on huge volume after earnings reports and that's exactly what K printed roughly 5 weeks ago:

K is not a fast mover. I'd expect 64.50 to hold as support, but I've drawn the next two key support levels to watch if 64.50 fails. The bottom of gap support near 62.50 would be the most likely short-term destination, while recent price lows that successfully tested price support at 61.50 would be the most critical support, in my view.

Strong AD Portfolio:

The Strong AD Portfolio gained 1.04% last week, topping the benchmark 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:

Despite the May CPI suggesting that inflation is rising, materials stocks didn't have the best week last week and MOS was one of our portfolio stocks that suffered as a result. The U.S. Dollar Index ($USD) closed above 90 and at a 4-week high, negatively impacting materials stocks. MOS has been a great performer, but losing the following support with a rising dollar could prove troublesome:

I'd like to see MOS rebound this week.

Summary

It's so hard to bet against a secular bull market. The bears have tried over and over. The trade war. Failure. The pandemic. Failure. Hyper-inflation. So far, failure. The naysayers don't want to believe. They scream high PEs, national debt, stimulus, the Fed's easy policy, inflation, irrational exuberance, and the list goes on and on. But so does the stock market.

The big picture remains unchanged. We're going higher. So often, the summer provides an overbought market the opportunity to pause and consolidate. We may still see that, but an outright bear market? I just don't see it.

If you didn't get an opportunity, I wrote an end of week summary in my Trading Places blog on Saturday. For more details about last week, check out my article, "Weekend Recap: Inflation Soars But Who Cares?"

Model ETF Portfolio

Our Model ETF Portfolio jumped 1.13%, stretching its quarter-to-date lead over 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:

Happy trading!

Tom Bowley, Chief Market Strategist

EarningsBeats.com

"Better timing. Better trades."