EB Weekly Portfolio Report - Sunday, October 31, 2021

Tom Bowley - October 31, 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, November 1: None

Tuesday, November 2: UAA, ETN

Wednesday, November 3: AWK, SITM (Earnings Reaction), FSLY (Earnings Reaction)

Thursday, November 4: MRNA, FND, SYNA, TGH, DDOG, CVNA, NET, PENN (Earnings Reaction), EXPI (Earnings Reaction)

Friday, November 5: 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.

ALSO: WE HAVE "ORIGINAL" EXPECTED EARNINGS DATES POSTED NEXT TO EACH STOCK SYMBOL IN OUR VARIOUS PORTFOLIO CHARTLISTS. I UPDATED THOSE EXPECTED DATES RECENTLY AND MANY OF THEM CHANGED SINCE THOSE ORIGINAL EXPECTED EARNINGS DATES, SO PLEASE BE AWARE OF THAT. YOU WILL SEE THOSE UPDATED EARNINGS DATES BELOW IN THE SUMMARY FOR EACH PORTFOLIO. IF YOU RE-DOWNLOAD OUR PORTFOLIOS FROM OUR WEBSITE, THE UPDATED EARNINGS DATES WILL AUTOMATICALLY APPEAR. AGAIN, I JUST WANT EVERYONE TO KNOW THAT MANY OF THESE EXPECTED EARNINGS DATES CHANGED IN RECENT WEEKS. PLEASE BE SURE TO DOUBLE CHECK EARNINGS DATES FOR ANY STOCKS THAT YOU HOLD.

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 Model Portfolio underperformed last week, but otherwise it was another solid week for our portfolios.

Weekly Summary

Benchmark S&P 500:

The S&P 500, along with the Dow Jones, NASDAQ, and NASDAQ 100, finished Friday at its all-time closing high. That's a very bullish development. I've been discussing the likelihood that we'd see a rebound in transportation stocks ($TRAN) and we have. However, this very influential group hasn't closed at an all-time high, though we're currently threatening it. A breakout in this group would add to the extreme bullishness:

Model Portfolio:

The Model Portfolio advanced 0.42%, but still underperformed 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:

COF seems more of a victim of its industry group than anything specific to the company. They delivered great numbers, crushing EPS estimates, $6.86 vs. $5.22. They also easily surpassed their revenue consensus estimate, $7.83 billion vs. $7.43 billion. But it wasn't enough as traders thrashed the stock. I'd look for a big bounce back from the support zone below:

That bottom panel is the big problem. If that turns back to the upside, I'd expect to see a swift recovery in COF. 147-150 has provided great support in recent months. We'll see if it holds again.

Aggressive Portfolio:

The Aggressive Portfolio jumped 3.90% last week, stretching its impressive quarterly lead over 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:

SYNA is breaking out on an absolute and relative basis as it gets set to report its latest quarterly results on Thursday of this week:

Anything can happen with earnings, but SYNA certainly appears set up to deliver blowout numbers.

Income Portfolio:

The Income Portfolio rose 1.02%, slightly underperforming the benchmark 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 came up short on its revenues when it reported its quarterly results last week and traders were not in the forgiving mood. It's one of the latest companies to blame supply chain issues for its lackluster performance. I see a topping head & shoulders breakdown last week on the weekly chart that ultimately could measure down to the 95 support level:

Restaurants ($DJUSRU) have turned lower vs. the S&P 500, setting a fresh new 3 year relative low in the process. SBUX has lots its leadership position and the overall weakness in the group certainly could carry SBUX lower. A trip to 95, though, would be excellent entry from a long-term perspective - in my opinion. Short-term, SBUX could weigh on our Income Portfolio.

Strong AD Portfolio:

The Strong AD Portfolio surged 6.72%, crushing 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:

MELI was the worst performer in this portfolio last week, though its performance wasn't horrible. Still, it's clearly trending lower and beneath its 20-day EMA. There is hope, however, as a positive divergence will form if a new recent closing low is reached:

MELI is not exactly a healthy stock technically as it's been downtrending vs. its peers, which have been exceptionally weak vs. the S&P 500. But we could see a rally near-term if a positive divergence prints.

Earnings Reaction Portfolio:

The Earnings Reaction Portfolio gained 2.36%, nearly doubling the S&P 500 performance. Here's the updated inception-to-date chart of the portfolio:

Here are how the Earnings Reaction portfolio component stocks performed last week:

Summary

U.S. equities had issues last week. There was the seasonality issue as the S&P 500 was mired in its worst historical week of the year, dating back to 1950. There was also the technical issue as a plethora of 60-minute negative divergences emerged, suggesting the market was losing momentum. Well, neither of these issues could keep the stock market down. The S&P 500 did end up barely budging during its bearish historical period (October 21st close through October 27th close). And it's now in the most bullish intermediate-term period of the year (October 27th close through January 18th close), where it's advanced 60 of the last 71 years. Those are very strong odds that this secular bull market rally is likely to carry right through year end and into 2022. I wouldn't bet against it.

Model ETF Portfolio

Our Model ETF Portfolio rose 1.93% last week, beating 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."