EB Weekly Portfolio Report - Sunday, August 8, 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, August 9: VUZI

Tuesday, August 10: None

Wednesday, August 11: None

Thursday, August 12: None

Friday, August 13: 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:

Weekly Summary

Benchmark S&P 500:

Both the S&P 500 and Dow Jones rallied to close the week at all-time highs. The NASDAQ set a new all-time high on Thursday, but pulled back slightly on Friday. Still, all of our major indices finished the week in positive territory. Slowing momentum on the weekly chart has had little impact on the S&P 500, as you can see below:

The S&P 500 has been dealing with weekly negative divergences since Q4 2020. And we've been mostly overbought for the past four months. Yet here we are, continuing to set new all-time highs. It's been a real lesson in how secular bull markets operate. Anyone sitting out and waiting for a big decline has been extremely frustrated. It's why, from a long-term perspective, you don't want to get out prematurely. Hang on to your stocks during bull markets.

Model Portfolio:

The Model Portfolio jumped 2.29%, gaining ground on 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 had an excellent week as it broke out of its 2-month downtrend channel:

The spike in volume and the eclipsing of 50-day SMA resistance has a bullish look to it. I'd expect the rising 20-day EMA to now become key support.

Aggressive Portfolio:

The Aggressive Portfolio rose 1.04%, eking past the benchmark S&P 500's gain. Here's the updated inception-to-date chart of the portfolio:

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

ARNC bounced nicely after it fell to close in on major price support:

The one big problem I see here is that AD line, which has weakened considerably over the past 6-7 weeks. Given that, I'd be very careful with ARNC if it were to lose the price support reflected.

Income Portfolio:

The Income Portfolio inched higher by 0.43% last week, slightly trailing 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:

Beginning next week, we'll replace WRI with KIM as their merger was completed last week. Those holding a share of WRI should have received 1.408 shares of KMI (plus $2.20 in cash). This transaction has been adjusted for in the computation of the Income Portfolio's return last week and this quarter.

PNC was a perfect example of a financial stock that was consolidating, waiting for a recovery in and rotation into financial stocks:

Strong AD Portfolio:

The Strong AD Portfolio declined 3.10%, lagging significantly behind 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:

AVID and EXPE both had rough weeks as they fell after reporting better-than-expected quarterly results. AVID, the biggest loser by far in all 4 portfolios, posted earnings of $.25, which beat Wall Street's consensus estimate of $.23, but it didn't matter:

I believe we'll see AVID rebound, but we could see additional weakness first as I've highlighted two key support levels to watch for a reversal.

Summary

After falling for 10 of the last 11 weeks, treasury yields jumped for the week, gaining 5 basis points and closing at 1.29%. It appears that we may have found a bottom on the 10-year treasury yield ($TNX) as a hammer printed on the 50-week SMA, which also coincided with what looks to be a successful test of channel support:

Note also that the weekly PPO has now tested centerline support and the weekly RSI turned right at 40, which is key support during uptrends.

The reversal in the TNX lifted financials (XLF) as they led all 11 sectors last week:

I'm expecting to see financials continue to perform well in the weeks ahead, but clearly the direction of the TNX will have a major impact. As you can see from all 4 portfolios last week, financials were leaders as money rotated significantly back into the group.

Model ETF Portfolio

Our Model ETF Portfolio gained 0.68% last week, slightly trailing the S&P 500's 0.94% climb.

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."