EB Weekly Portfolio Report - Sunday, August 29, 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 30: None

Tuesday, August 31: None

Wednesday, September 1: None

Thursday, September 2: DOCU

Friday, September 3: 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 Thursday, August 19th; members may choose to try to time better entries, but EB.com "purchased" as of August 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 in the February through May period 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 consider owning or trading 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 portfolios had a solid first week with all but the Income Portfolio outperforming. The Earnings Reaction Portfolio had a super week. That wasn't an official "draft", nor an official portfolio of ours. Instead, it was more of an experiment to put together 10 equal-weighted stocks that had excellent AD line reactions to earnings (opening bell to closing bell the day after earnings were released). I'll continue to track the weekly results here.

Weekly Summary

Benchmark S&P 500:

I feel bad for anyone that continues to approach U.S. equities with a bearish mindset. That approach simply isn't working. Stocks have been incredibly resilient and seem to ignore any negative fundamental or technical news. This is the hallmark of a secular bull market. It's all about resiliency and rotation. Surprisingly - at least to me - energy (XLE) and materials (XLB) led last week's action as the U.S. Dollar ($USD) weakened. But a key takeaway was the fact that aggressive sectors moved higher, while defensive sectors lost ground:

We can argue back and forth on the merits of owning energy and materials stocks. I believe most of our EB.com members know where I stand on that one. I'm not a fan over the longer-term. However, when the S&P 500 breaks and closes above 4500 for the first time in its history, it's noteworthy that aggressive sectors led the advance. This rally remains sustainable and that's excellent news for the bulls.

Model Portfolio:

The Model Portfolio gained 1.96%, which beat 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:

Aggressive Portfolio:

The Aggressive Portfolio jumped 3.56%, easily outdistancing 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:

Income Portfolio:

The Income Portfolio climbed 0.95%, but came up short of the S&P 500's rise. Here's the updated inception-to-date chart of the portfolio:

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

Strong AD Portfolio:

The Strong AD Portfolio spiked 3.43%, beating the S&P 500 for the week. Here's the updated inception-to-date chart of the portfolio:

Here are how the Strong AD portfolio component stocks performed last week:

Earnings Reaction Portfolio:

The Earnings Reaction Portfolio surged 5.34% last week, crushing the S&P 500. Here are how the Earnings Reaction portfolio component stocks performed last week:

As I look at the SCTR scores of each stock, it's hard to ignore that the best performers had the lowest SCTR scores. This is a theme that we see during options expiration week and the week after. I'll be very interested to see whether a stock like PENN can keep up this momentum without options being an incentive for market makers to drive the price higher.

Summary

I didn't provide any individual stock charts this week as it's very early in the new quarter. Nearly every chart remains quite positive. Two that have struggled a bit have been UPS and SBUX. I believe both will be fine, but they need to begin trading above their 20-day EMAs. That will be the first signal of a renewed uptrend. ETN could see short-term weakness as a result of a negative divergence on its daily chart. I'd expect it to do well over the quarter, but a 5-7% drop wouldn't be shocking given the state of its momentum.

Model ETF Portfolio

Our Model ETF Portfolio gained 1.72% last week, which outperformed 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."