EB Weekly Portfolio Report - Sunday, December 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, December 6: None
Tuesday, December 7: None
Wednesday, December 8: None
Thursday, December 9: COST, LULU
Friday, December 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 Friday, November 19th; members may choose to try to time better entries, but EB.com "purchased" as of November 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 2021 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 a volatile and painful week for many U.S. equities. The Dow Jones lost just 0.91%, but the S&P 400 Mid Cap Index ($MID) fell nearly 3%. Meanwhile, growth stocks (IWF, -2.11%) lost almost twice that of value stocks (IWD, -1.10%). Friday was a very difficult day for growth stocks as the IWF dropped 1.67% while value stocks fell a much lower 0.24%. The most troubling part of the selloff in many growth names was that treasury yields were actually falling. The 10-year treasury yield ($TNX) fell 10 basis points on Friday after a weaker-than-expected jobs report was released and it fell 14 basis points for the entire week.
Model Portfolio:
The Model Portfolio dropped 4.75%, lagging 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:
ENPH seems destined for a 50-day SMA test after reversing on November 22nd with a negative divergence in play:
Aggressive Portfolio:
The Aggressive Portfolio tumbled 5.03%, trailing the S&P 500 badly. Here's the updated inception-to-date chart of the portfolio:
Here are how the Aggressive portfolio component stocks performed last week:
A week ago, I felt LC could potentially be bottoming as it tested price support and the 50-day SMA simultaneously. That support did not hold and LC now has two lower levels that could be tested:
Income Portfolio:
The Income Portfolio lost 1.74%, barely underperforming 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:
M was another where sellers were relentless last week. After failing to hold onto support just above 28, 25.20 looks like the next key support:
Strong AD Portfolio:
The Strong AD Portfolio lost 6.48%, losing considerable ground vs. 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:
There were a number of very poor performing stocks in this portfolio last week, but the bottom two look somewhat similar. After significant declines, both are now testing trendline support:
Earnings Reaction Portfolio:
The Earnings Reaction Portfolio fell 5.80%, underperforming 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
Panic is in the air with the Volatility Index ($VIX) closing at 30.67, a rise of 7.16% last week. Also, the equity only put call ratio ($CPCE) finished at .74 on Friday, its highest level in over a year. A high CPCE tells us that more puts are being traded on a relative basis. I believe the absolute best and most reliable charts to use to help identify market bottoms are the VIX and CPCE. Extreme bearishness has historically provided us the clues we need. There's definitely room for more panic in the near-term, so I wouldn't rule out a swift selloff on Monday or early this week, but just understand that as panic balloons, a likely bottom will form. I wrote a lot about this topic over the weekend in my Trading Place blog. Rather than duplicate that work, you can CLICK HERE to read this article.
Model ETF Portfolio
Our Model ETF Portfolio fell 3.29%, 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."