EB Weekly Portfolio Report - Sunday, July 25, 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 26: None
Tuesday, July 27: GOOGL, UPS, ENPH
Wednesday, July 28: GNRC
Thursday, July 29: EXPE, WRI, SBH
Friday, July 30: CNHI
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 fairly solid week for our portfolios, with the Income Portfolio being the exception. The growth stocks in our portfolios clearly carried the others. Unfortunately, the Income Portfolio is not really represented by much growth.
Weekly Summary
Benchmark S&P 500:
A historically-bearish week that started on a very sour note ended with yet more record highs. There was plenty of reason to be cautious heading into the week as options had just expired and the 19th day of ALL calendar months is the worst day of the calendar month - likely because the 19th will either be deep in options expiration week or it will occur just after options expire. In either event, it'll typically behoove market makers to see that prices move lower and history tells us that selling on and around the 19th is the norm.
Monday started off horribly as futures were down big time. But an afternoon rally - the NASDAQ even closed above its open on Monday - set the stage for a rally the balance of the week. By the time the closing bell rang on Friday, the Dow Jones, S&P 500, NASDAQ, and NASDAQ 100 all were at all-time closing highs.
Model Portfolio:
The Model Portfolio jumped 3.05%, beating 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:
YETI performed exceptionally well last week, breaking to a fresh all-time high close on Friday, just two weeks before it reports its quarterly results on August 5th:
Aggressive Portfolio:
The Aggressive Portfolio surged 5.47%, easily outpacing 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:
IPG used an exceptionally-strong earnings reports to launch itself into record-high territory. Volume soared too, and that leaves me believing that we're going to see higher prices ahead:
Income Portfolio:
The Income Portfolio fell 0.48%, trailing the benchmark 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 ruined the week for the Income Portfolio. Earnings were reported and HOG missed its revenue estimate. Technically, it continues to fail at its now-declining 20-day EMA, which needs to reverse. There are some positives on the chart, but key support levels need to hold:
A best-case scenario would include a bottoming relative head & shoulders pattern with the relative right shoulder printing now.
Strong AD Portfolio:
The Strong AD Portfolio tacked on 2.89%, edging higher vs. 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:
Earnings were released for CROX and they were outstanding, easily surpassing estimates for both revenues and EPS. As a result, CROX saw a big gap higher and a new all-time high:
Nike (NKE), Crocs (CROX), and Skechers (SKX) have all now posted excellent quarterly results, enabling the footwear industry ($DJUSFT) to become one of the best groups right now.
Summary
It's very difficult to be bearish when most of our key indices are all setting new record highs simultaneously. And as we broke out to those new highs last week, you need to see the weekly leadership:
While industrials (XLI) managed to perform well, the one wild card in the market right now resides in that sector. Transports ($TRAN) remain under pressure. The Dow Theory requires transports to break out to confirm the industrial average breakout (or vice versa). So we're still missing that. I'll be watching the transports very, very closely. The TRAN on Friday closed above its 20-day EMA for the first time in more than 10 weeks. It cleared that moving average by only 3 points, but it's got to start somewhere. Should transports begin to strengthen, a great, balanced way to play it would be with the IYT (ETF that tracks transports). The IYT is a heavily-concentrated ETF and its top holdings include Fed Ex (FDX - 12.56%), and two railroads, Kansas City Southern (KSU - 11.93%) and Norfolk Southern (NSC - 11.17%). These three stocks alone account for 35.66% of the ETF, so it definitely makes sense to see if any or all of these three begin to strengthen.
Model ETF Portfolio
Our Model ETF Portfolio gained 2.31% last week, outperforming the S&P 500's gain of 1.96%.
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."