EB Weekly Portfolio Report - Saturday, December 25, 2021
Abbreviated Report
I will be traveling on Sunday, so I'm sending out an abbreviated Weekly Portfolio Report.
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 27: None
Tuesday, December 28: None
Wednesday, December 29: None
Thursday, December 30: None
Friday, December 31: 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:
The S&P 500 ended the week on a high note, closing at an all-time high on Friday. However, that new high came with a major warning sign as defensive sectors have been leading this latest rally, which is never a good sign. It doesn't guarantee us that this rally will fail, but it increases the odds of such a failure - at least in my opinion.
In the ChartWatchers newsletter this weekend, I wrote an article providing more details about this warning. You can CLICK HERE to read the article.
Model Portfolio:
The Model Portfolio jumped 4.85%, beating 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:
Aggressive Portfolio:
The Aggressive Portfolio gained 5.34%, beating 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:
Income Portfolio:
The Income Portfolio climbed 2.39% last week, edging 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:
Strong AD Portfolio:
The Strong AD Portfolio surged 5.76%, easily surpassing 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:
Earnings Reaction Portfolio:
The Earnings Reaction Portfolio rose 4.96% last week, beating 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
Historically, we're in a very strong period of the year. Last week, we saw the bullish historical tailwinds help lead the market higher. Next week, the bullish tailwinds remain. I'm nervous short-term, because of the defensive leadership that has coincided with the S&P 500 all-time high. The bullish case is that we'll see renewed leadership from areas like technology (XLK) and consumer discretionary (XLY). Should that occur, then there's a much better chance of rising equity prices into yearend and into 2022. But if Wall Street continues to rotate towards defensive sectors, then all bets are off.
Model ETF Portfolio
Our Model ETF Portfolio gained 2.27%, matching the benchmark 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."