EB Weekly Portfolio Report - Sunday, September 5, 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, September 6: None (Labor Day - Market Closed)
Tuesday, September 7: None
Wednesday, September 8: None
Thursday, September 9: None
Friday, September 10: 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:
Weekly Summary
Benchmark S&P 500:
It was another solid week for U.S. equities, although the top 4 performing sectors were all defensive groups:
Model Portfolio:
The Model Portfolio dropped 0.74%, and has now fallen slightly behind the S&P 500 for the quarter. Here's the updated inception-to-date chart of the portfolio:
Here are how the Model portfolio component stocks performed last week:
COF was primarily responsible for the Model Portfolio's underperformance last week. Unfortunately, COF's industry group, consumer finance ($DJUSSF) has been weak for several weeks now and it's beginning to spill over into the leaders in the space:
That bottom panel is the problem. The DJUSSF hit a new 52-week low vs. the S&P 500. COF remains a leader in consumer finance, but the overall group needs to attract more buyers. Until then, COF may remain a laggard in our portfolio.
Aggressive Portfolio:
The Aggressive Portfolio jumped 2.07%, beating the S&P 500 last week. Here's the updated inception-to-date chart of the portfolio:
Here are how the Aggressive portfolio component stocks performed last week:
M had a rough week, but it remains comfortably above both its 20-day EMA and price support:
Income Portfolio:
The Income Portfolio fell 0.11%, 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:
WFC had a very difficult week, which was exacerbated by a weak financial (XLF) group overall. The XLF lost 2.38% last week, badly underperforming the S&P 500. But it was the news on WFC - that regulators are potentially considering further action against the bank for its slow progress related to its recent scandal - that had traders exiting the bank in droves. There is no mistaking the volume that accompanied last week's selling:
The AD line took a hit, but I've provided the two blue circles that I'd watch most closely. One is the key area of price support, while the other is key relative support to ensure that WFC remains a solid performer among its peers. While I was practicing public accounting, I audited banks, and I find it difficult to believe that the Fed will not give WFC every opportunity to correct any deficiencies. So I'd view last week's selling as a HUGE overreaction.
Strong AD Portfolio:
The Strong AD Portfolio climbed 1.40%, 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:
LC had a solid week, but I think the biggest breakout was DOCU, which reported quarterly results on Thursday evening, and then promptly closed at its highest level ever on Friday:
Earnings Reaction Portfolio:
The Earnings Reaction Portfolio gained 1.82% last week, easily surpassing the S&P 500. Here are how the Earnings Reaction portfolio component stocks performed last week:
This portfolio held up quite well, despite the big loss in WFC last week.
Summary
Most signals that I watch closely remain in "full speed ahead" mode. That doesn't mean we cannot see short-term selling as many times we'll see selling kick in without any real warning signs. Also, while history tells us to be a bit more cautious in September, secular bull markets tend to remain somewhat bullish. Since the 2007-2009 market bottom in March 2009, September has produced much more bullish action in the first 16 days of the month. Check out this September breakdown for years 2009 through 2020:
September 1-16: +40.22%
September 17-30: -21.18%
History never provides us any guarantees, but it does certainly suggest that the second half of September should be respected for potential weakness - even during the absolute best stock market years.
Model ETF Portfolio
Our Model ETF Portfolio gained 0.89% 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."