EB Weekly Portfolio Report - Sunday, November 14, 2021
Fall Special
I want to make sure that all of our members are aware that our Fall Special started yesterday and will continue the next two weeks. It's the BEST deal we've ever offered at EarningsBeats.com as we're rewarding members significantly for extending their membership over 1-year, 2-year, or 3-year periods. Anyone extending will receive the following number of bonus months FREE:
- 1-year extension: 2 bonus months FREE
- 2-year extension: 6 bonus months FREE
- 3-year extension: 1 bonus YEAR FREE
If you have any questions, please reach out to us at "[email protected]". We really appreciate your support and hope you'll take us up on this SPECIAL offer!
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 15: None
Tuesday, November 16: None
Wednesday, November 17: NVDA
Thursday, November 18: M
Friday, November 19: 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:
Our Model Portfolio had a nice week on a relative basis and actually climbed back above (barely) the S&P 500 quarter-to-date. Overall, it was a decent week, considering the bad news on the inflation front.
Weekly Summary
Benchmark S&P 500:
Last week was the November version of "Inflation - Here We Go Again". After the October CPI came in much hotter than expected, growth stocks took a tumble on Wednesday. Fortunately, Wall Street quickly indicated that they still don't believe inflation will be problematic longer-term. That resulted in the S&P 500 losing only a fraction last week. Technology (XLK, +0.14%) actually finished the week higher and outperformed real estate (XLRE, -0.06%), a sector that would be expected to benefit from inflation-related rotation. Here's a long-term chart of Core CPI with the 12-month rate of change (ROC) to highlight the annual inflation rate on the consumer level:
This century, the worst inflation scare came in 2004 to 2006 as inflation persistently rose. Throughout that period, technology fell considerably on a relative basis vs. real estate (XLK:XLRE), which is what I'd expect when Wall Street is truly concerned about inflation. Look at that MASSIVE spike in inflation in 2021 and the almost muted response in the XLK:XLRE ratio. If Wall Street was truly concerned about surging inflation or hyper-inflation, this relative ratio would be tumbling. It's simply not happening. Wall Street is putting their trillions of dollars to work and they continue to BUY technology. The pandemic (and the subsequent recovery) has created many temporary economic imbalances and one is showing up as surging inflation. I do not believe we're in an inflationary environment, but rather a temporary imbalance in demand vs. supply. While the short-term may continue to suggest the Fed is losing control of inflation, I'm not worried about the longer-term.....and neither is Wall Street.
Model Portfolio:
The Model Portfolio jumped 2.45%, gaining further vs. the S&P 500 and actually climbing just past that benchmark index for the current quarter. Here's the updated inception-to-date chart of the portfolio:
Here are how the Model portfolio component stocks performed last week:
SHOP helped to lift this portfolio as it surged to fresh all-time highs last week:
This bullish inverse head & shoulders breakout measures to the 1800-1850 level. I expect to see that before year end.
Aggressive Portfolio:
The Aggressive Portfolio slid 0.07%, but still managed to outperform 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:
TGH is struggling short-term, but it has momentum issues that could result in a 50-day SMA test:
Income Portfolio:
The Income Portfolio dropped 0.11%, slightly outperforming 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:
WHR has been strengthening and remains a very strong stock in the durable household goods industry ($DJUSHD). Its peer group finally has started to cooperate, benefiting WHR:
Strong AD Portfolio:
The Strong AD Portfolio fell 2.13% last week, losing ground to 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:
MWA missed its EPS estimate last week, $.12 vs. $.19, and Wall Street didn't like it. The character of the chart has turned much more bearish, dropping below its key moving averages on very heavy volume. I would expect further damage technically on the chart, so I've identified key price support levels I'd watch:
It's very unfortunate as the industrial sector recently broke out and its building materials & fixtures peers are on the verge of a relative breakout as well, so there are tailwinds for MWA. However, the earnings miss suggests the other technical breakouts are less likely to help.
Earnings Reaction Portfolio:
The Earnings Reaction Portfolio lost 2.15%, and fell behind the S&P 500 since its inception. It did recover after our latest draft, however, on Wednesday, cumulatively gaining more than 2% on Thursday and Friday. Here's the updated inception-to-date chart of the portfolio:
Here are how the Earnings Reaction portfolio component stocks performed last week:
Summary
We're halfway through Q4 and earnings have begun to slow considerably. That results in relative weakness in most quarters. However, Q4 is different as the 2nd half of the quarter tends to perform fairly well. For instance, during this secular bull market that began in 2013, the November 15th to December 31st period has averaged gaining 1.48%. I don't believe we'll keep up aggressive pace that we saw the past six weeks, but I do believe we'll end 2021 higher than where we are now.
I expect we'll see outperformance from consumer discretionary (XLY), industrials (XLI), transportation ($TRAN), small caps ($SML), and mid caps ($MID) through year end based upon the bullish breakouts recently in all 5 areas.
Model ETF Portfolio
Our Model ETF Portfolio fell 0.54% last week, slightly trailing 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."