EB Weekly Portfolio Report - Sunday, July 18, 2021

Tom Bowley - July 18, 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, July 19: None

Tuesday, July 20: None

Wednesday, July 21: TXN, KMI, EFX, IPG, THC, HOG

Thursday, July 22: CROX

Friday, July 23: 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:

Our portfolios all underperformed the S&P 500 during July options expiration week

Weekly Summary

Benchmark S&P 500:

The S&P 500 had gained ground 6 of the past 7 weeks, but options expiration week produced a different result as all of our major indices fell. There was quite a disparity, however, in the percentage losses. While the S&P 500 lost nearly 1%, the Dow Jones fell just 0.52%, while the S&P 600 Small Cap Index ($SML) dropped more than 4.5%. Small caps have definitely been showing signs of slowing momentum on their weekly chart and that could be having a significant technical impact:

It's been a while since the $SML has seen a weekly close beneath its 20-week EMA, but that's what it saw last week. This chart suggests that the summer doldrums have begun and that we should expect more choppiness in the weeks ahead.

Model Portfolio:

The Model Portfolio lost 3.99% and is now trailing the S&P 500 quarter-to-date. Here's the updated inception-to-date chart of the portfolio:

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

IGT was clearly the big loser here and accounted for nearly 1.5% of our underperformance last week. Technically, it has rolled over, but is now testing a key price support level. I'd say it needs to reverse this week or it will become much more technically-challenged:

Gambling stocks ($DJUSCA) overall have been extremely weak on a relative basis and that's certainly not helping IGT.

Aggressive Portfolio:

The Aggressive Portfolio dropped 4.88%, marking one of its worst weeks this quarter. Here's the updated inception-to-date chart of the portfolio:

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

Of all the weakness in the Aggressive Portfolio last week, it appears that ARNC could see some additional downside action as it has another couple bucks before it reaches key price support:

Income Portfolio:

The Income Portfolio fell 1.80%, also losing ground to 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:

HOG and KMI were the two biggest losers in the Income Portfolio, but their short-term outlooks will depend greatly on earnings and outlooks. We'll find out more when both report their quarterly earnings on Wednesday.

Strong AD Portfolio:

The Strong AD Portfolio tumbled 5.93%, badly lagging 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:

The U.S. Dollar ($USD) is showing short-term strength and that's no doubt adding to selling pressure in both materials and energy stocks. EOG Resources (EOG) is an affected stock and now needs to reverse soon to hang onto price/channel support:

Summary

The only strength seen in the market last week was in defensive areas. The following weekly sector summary perfectly illustrates this:

The only 3 sectors to advance were utilities (XLU), consumer staples (XLP), and real estate (XLRE). This is certainly an indication that Wall Street is turning more conservative in the very near-term. We have just entered the most bearish period of the year from the July 17th close to the September 26th close, so we should reset our expectations a bit lower until we near Q4. Perhaps this year is different, but history does tell us to be more cautious.

Model ETF Portfolio

Our Model ETF Portfolio, like our stock portfolios, underperformed the S&P 500 and lost 2.78% 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."