EB Weekly Portfolio Report - Sunday, July 11, 2021
Last Week's Portfolio Report
I apologize for not sending out the Weekly Portfolio Report last Sunday. It was the first time I've missed one since we started tracking our portfolios. I wanted to get both the Monthly Short Report and Monthly Seasonality Report out and that, combined with a busy holiday weekend, didn't allow me the time to finish all the reports. We're back on track this week.
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, July 12: None
Tuesday, July 13: JPM, GS
Wednesday, July 14: WFC, PNC
Thursday, July 15: None
Friday, July 16: SCHW
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:
Our portfolios were a mixed bag last week with our Income Portfolio showing a bit of relative strength, while our other portfolios lost ground and trailed the S&P 500.
Weekly Summary
Benchmark S&P 500:
The bullish action continues as the Dow Jones, S&P 500, and NASDAQ all closed at all-time highs on Friday. There are two short-term concerns that I have. Otherwise, I'm very bullish and believe this current rally is sustainable. The first issue I have is with transportation stocks ($TRAN), which are not cooperating and remain 6% or so below their all-time high set back in May. Also, the move into treasuries is historically met with much more choppy stock market action. Prior to Friday's rebound in the 10-year treasury yield ($TNX), the TNX had fallen from 1.75% in late-March to 1.27% on Thursday. That's a steep drop and, even during secular bull markets, declines in the TNX generally coincide with, at best, choppy stock prices.
Model Portfolio:
The Model Portfolio lost 0.26% last week, slightly trailing 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:
SCHW's 3% drop last week has left it in perhaps the most precarious position among our Model Portfolio stocks. It's lost its 20-day EMA and also lost short-term price support before bouncing on Friday:
While the break beneath the 20-day EMA and the daily PPO moving into negative territory is clearly a concern, SCHW's AD line actually moved to new highs, suggesting this latest dip was an opportunity for professionals to accumulate prior to this week's earnings. That's my take at this point. If SCHW moves below last week's low, I'd grow more cautious.
Aggressive Portfolio:
The Aggressive Portfolio dropped 0.71%, trailing the S&P 500's fractional gain last week. Here's the updated inception-to-date chart of the portfolio:
Here are how the Aggressive portfolio component stocks performed last week:
ATH was the worst performer here, but it looks like nothing more than a normal 20-day EMA test to me:
Income Portfolio:
The Income Portfolio gained 0.64%, outperforming the S&P 500, but has more work to do this quarter. Here's the updated inception-to-date chart of the portfolio:
Here are how the Income portfolio component stocks performed last week:
ORCL had a big bounce-back week and broke to new highs. Its AD line also is strengthening, despite the dip a few weeks ago:
It's very impressive that ORCL has printed 7 consecutive "hollow" candles, which means that the stock closed higher than its open for the past 7 days, another sign of accumulation.
Strong AD Portfolio:
The Strong AD Portfolio fell 0.82%, losing ground to the S&P 500, though still maintaining a quarter-to-date lead. Here's the updated inception-to-date chart of the portfolio:
Here are how the Strong AD portfolio component stocks performed last week:
Of these 10 stocks, VUZI remains the most technically-challenged:
VUZI is in a very wide trading range between 13.70 and 20.30. A break above or below these key price levels will likely determine the future direction here. Keep in mind that VUZI ran from 4 to 32 in 4 months, so consolidation here is not a bad thing.
Summary
The S&P 500 has a strong historical tendency to move higher as we approach earnings season, so we're really seeing nothing different right now. My real dilemma is not whether to be invested in U.S. equities, but instead whether to be invested more heavily in growth or value stocks. The volatility in the TNX is making this very difficult to invest in either group with much confidence. The uncertainty there is what had us leaning toward splitting our Model ETF portfolio and our stock portfolios between both growth and value, realizing that would likely result in mediocre performance designed to be fairly close to the S&P 500. That's literally what's been taking place this quarter - mostly mirroring the S&P 500.
Model ETF Portfolio
Our Model ETF Portfolio inched higher by 0.08%, slightly underperforming 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."