EB Weekly Portfolio Report - Sunday, October 10, 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, October 11: None
Tuesday, October 12: SGH
Wednesday, October 13: None
Thursday, October 14: WFC
Friday, October 15: 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 market and our portfolios started the week very rough, but did bounce back later, cutting big losses from earlier in the week.
Weekly Summary
Benchmark S&P 500:
On the surface, the S&P 500 finished the week in positive territory, which is obviously a good thing and beats the alternative. However, the market was led higher last week by energy (XLE), financials (XLF), and industrials (XLI) as you can see below:
The next three sectors were two defensive groups - consumer staples (XLP) and utilities (XLU) - and materials (XLB). So while we did see positive movement in our key indices, there was definitely a slant towards the more value-oriented areas of the market, which is generally not going to favor our portfolios as we're much more growth-oriented.
Model Portfolio:
The Model Portfolio declined 1.02%, trailing 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:
CROX struggled further last week and now appears headed to the following gap support:
It's clearly trending beneath its now-declining 20-day EMA, so those looking to trade CROX might want to consider waiting either for gap support to be tested or a recovery back above the 20-day EMA.
Aggressive Portfolio:
The Aggressive Portfolio dropped 1.33% last week, also lagging 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:
MRNA continues to weaken, but I've covered the stock recently. I'm still looking for a potential test of gap support near 275, and possibly just beneath it.
Income Portfolio:
The Income Portfolio rose 0.45%, but still fell a tad short of 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:
Despite the weakness in CROX, NKE managed to reverse its recent trend of selling. Nonetheless, it simply tested the falling 20-day EMA, so it's still got plenty of technical work ahead:
There is very good news here, though. Check out the relative strength of NKE vs. its footwear peers. It's begun to soar. Should the group begin to bounce, which I suspect it will, NKE should recover more of its recent losses.
Strong AD Portfolio:
The Strong AD Portfolio gained 1.69%, edging the S&P 500 last week. Here's the updated inception-to-date chart of the portfolio:
Here are how the Strong AD portfolio component stocks performed last week:
NET exploded back to the upside last week after testing the 110 level, which is where it had broken out from:
NET was a stock I discussed a few weeks ago, suggesting it could run into difficulties due to the negative divergence in play. It lost its 50-day SMA subsequently, but did manage to find support at that 110 level before rebounding strongly.
Earnings Reaction Portfolio:
The Earnings Reaction Portfolio fell 1.17%, dropping nearly 2 percentage points to the S&P 500. Here's the updated inception-to-date chart of the portfolio:
Here are how the Earnings Reaction portfolio component stocks performed last week:
Summary
Well, this week kicks off Q3 earnings season. I expect excellent quarterly results. There will be much talk about supply chain issues and some companies will suffer as a result. But I believe the overwhelming response will be positive with our major indices moving once again to all-time highs. I find it very constructive that energy and financials have both turned technically bullish. That adds to bullishness in key aggressive areas of the market, despite some short-term selling since early September. Pullbacks are necessary and actually help to build a base from which to launch.
I'll be very surprised if the short-term weakness accelerates during the balance of Q4. It would be very uncharacteristic. I'd watch the 20-day EMA. Currently, our major indices are finding short-term resistance there. Obviously, we cannot set new all-time highs without first clearing that moving average. So that's our first step to recovery.
Model ETF Portfolio
Our Model ETF Portfolio rose 0.31% last week, slightly underperforming 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."