EB Weekly Portfolio Report - Sunday, January 23, 2022
Earnings Dates - Changes
In each of our portfolio ChartLists, we provide a date and time for each company's earnings report. When the ChartLists were first published, dates provided were "estimates" and several have since changed. AMD, LC, KLAC, M, TRI, EFX, PFE, ON, EXTR, BJ, and TW all have seen their earlier estimated earnings dates change. If earnings dates are important to you, just be sure to check on all those you're interested in.
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, January 24: None
Tuesday, January 25: MSFT
Wednesday, January 26: TSLA, LC,
Thursday, January 27: KLAC, EXTR
Friday, January 28: 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 sea of red last week. Most major indices tumbled anywhere from 4.58% (Dow Jones) to 7.64% (S&P 600 Small Cap). Growth stocks trailed value stocks again, especially among large cap names. Several large cap semiconductor names like Advanced Micro Devices (AMD, -13.20%) and NVIDIA (NVDA, -13.24%) put tremendous pressure on the tech-heavy NASDAQ. Tesla (TSLA, -10.07%) had one of its worst weeks over the past year. All 11 sectors finished lower last week, including hardest-hit consumer discretionary (XLY, -8.19%) and technology (XLK, -6.90%).
Volume accelerated last week on the selling, which sent the AD lines reeling. Our major indices closed on or near their lows every day last week, a definitive sign of institutional selling and distribution. We'll likely see lower prices ahead, though an oversold bounce could occur at any time.
The NASDAQ has lost an almost unthinkable 2100 points, or approximately 13%, since its high on January 4th near 15850. There's no sugar coating this, it's been brutal.
Model Portfolio:
The Model Portfolio dropped 9.06%, 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:
Aggressive Portfolio:
The Aggressive Portfolio tumbled 12.11%, badly underperforming 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 fell 9.08%, underperforming last week. 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 was crushed 11.20%, losing more 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:
Earnings Reaction Portfolio:
The Earnings Reaction Portfolio lost 7.85%, also trailing 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
It was a bad combination last week. First, nearly everything sold off as distribution could be seen across just about every index, sector, industry group, and individual stock. Second, the rotation once again favored value, so growth was not only down a lot on an absolute basis, but its relative weakness continued. That has made it virtually impossible for any growth-related investments to perform well and none of ours did.
On further short-term selling, I'd be watching a key support area near 4300, where a key neckline could be established:
The RSI has moved below 30, which is typically an indication of a character change on the chart. Rarely do we see uptrends simply carry on once the RSI has broken below 30. Therefore, BEST CASE is that we'll sideways consolidate for a period of time. But I would seriously doubt that. I'm expecting further weakness with bounces along the way. The declining 20-day EMA should be viewed as major resistance until proven otherwise. If we don't bounce before 4300, I would certainly expect to do so at that level. An intraday drop well below 4300 with a close back above would likely encourage me to take a short-term chance on the long side (from a trading perspective). That, almost certainly, would occur simultaneously with a VIX shooting well into the 30s - a common area for at least a temporary bottom to form.
Model ETF Portfolio
Our Model ETF Portfolio dropped 6.58%, failing to keep up with the S&P 500. The Model ETF Portfolio from last quarter was replaced as of the close on January 19th. The information below relates ONLY to the ETFs in our "new" Model ETF Portfolio. Results from the "old" Model ETF Portfolio are not reflected below.
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."