EB Weekly Portfolio Report - Saturday, September 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, September 20: None
Tuesday, September 21: None
Wednesday, September 22: None
Thursday, September 23: NKE, COST
Friday, September 24: 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:
Considering the weak nature of the overall market last week, I felt our portfolios held up well. The only portfolio to underperform was the Income Portfolio. The others outperformed, even if slightly, and we'll generally take that type of relative performance.
Weekly Summary
Benchmark S&P 500:
Well, we've completed the "bullish" part of September, and while we haven't seen massive selling, we have seen the S&P 500 fall 7 of the last 9 days. It's down over 100 points from its intraday high of 4545.85 on September 2nd. Volume was huge on Friday's selling, but I wouldn't read too much into that. Volume is always extremely high on the four quad witching options expiration days, which is the 3rd Friday in March, June, September, and December. Still, the S&P 500 did finish Friday just a tad beneath its 50-day SMA and that could trigger additional selling next week. Historically, next week is the second worst week of the year (October 21-27 is the worst).
Model Portfolio:
The Model Portfolio dropped 0.16%, but still managed to outperform 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:
Many areas of retail rebounded late in the week, but that didn't help UAA, which was a poor performer on the week:
I would expect to see UAA hold at its gap support zone (green-shaded area), which is where UAA accelerated higher on strong volume. Also, keep an eye on relative support vs. its clothing & accessories ($DJUSCF) peers.
Aggressive Portfolio:
The Aggressive Portfolio climbed 0.21%, beating the benchmark S&P 500. Here's the updated inception-to-date chart of the portfolio:
Here are how the Aggressive portfolio component stocks performed last week:
NVDA closed just beneath its 20-day EMA on Friday. If we see more selling next week, NVDA could easily see a trip to price support at 208.50. It remains an excellent relative performer among semiconductors ($DJUSSC), however.
Income Portfolio:
The Income Portfolio fell 1.25%, losing ground vs. 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:
SBUX had a rough week, but is quickly approaching channel and price support in the 108-110 area:
I also want to mention that AWK's weakness was to be expected near-term because of its recent negative divergence:
For anyone trading stocks in these portfolios, AWK is a defensive stock that looks quite appealing at 175 and even better if it were to reach 170.
Strong AD Portfolio:
The Strong AD Portfolio was breakeven last week, outperforming 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:
NET was strong last week, but with a very negative divergence and light volume on its last bullish candle, I see this one down next week. I love the stock, but I just believe short-term could be problematic here:
NET is still an excellent relative performer in the bullish software group ($DJUSSW), so I wouldn't write it off. Just understand why it could struggle this week.
Earnings Reaction Portfolio:
The Earnings Reaction Portfolio gained 0.90% last week, outdistancing the S&P 500. Here are how the Earnings Reaction portfolio component stocks performed last week:
9 of 10 stocks in this portfolio gained ground last week - impressive for an options expiration week, especially one in which the benchmark S&P 500 lost ground.
Summary
I included a chart of the 10-year treasury yield about 6 weeks ago, suggesting that channel support was being tested. Well, that channel support still has not been lost. Check this out:
The turn back to the upside was great timing. The RSI at 40 has held perfectly and the PPO is showing signs up turning back higher as well. If this rebound in the TNX continues and we begin to see 1.40% and higher, I'd look for the financials (XLF) to show relative strength again. Here's what the XLF:$SPX relative ratio currently looks like:
Obviously, a breakout above relative channel resistance would be extremely bullish for financials, but a move up to test that resistance to lead to nice short-term gains in financials. But again, I'd want to see the TNX move back up through 1.40% to feel confident about the sector's strength.
Model ETF Portfolio
Our Model ETF Portfolio dropped 0.12% last week, but still gained ground on the S&P 500, which lost 0.57%.
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."