EB Weekly Portfolio Report - Sunday, January 30, 2022
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 31: None
Tuesday, February 1: None
Wednesday, February 2: AMD
Thursday, February 3: U, F, TW
Friday, February 4: 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:
Energy (XLE, +5.09%) had another very strong week and we finally saw a rebound in technology shares (XLK, +2.38%). Most of technology's strength, however, came from computer hardware ($DJUSCR, +4.64%) as Apple (AAPL, +4.88%) exploded higher after reporting strong quarterly results. That helped large cap growth ($DJUSGL) outperform large cap value ($DJUSVL), but the same was not true in the small- and mid-cap space. Both mid-cap growth ($DJUSGM) and small-cap growth ($DJUSGS) saw lows on Friday that penetrated the earlier low on Monday. So while it was great to see Friday afternoon buying, just realize that prior to that rally, things were growing worse among most growth stocks and that's very worrisome as I look down the road.
Model Portfolio:
The Model Portfolio dropped 2.17%, 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:
In each of our portfolios, I decided to look for one stock that was showing possible signs of manipulation to the downside. Our portfolios are represented by many small and mid cap growth stocks, and these types of stocks are all being punished and have been since November. But we saw most stocks being punished in March 2020 as well. It turns out that many were manipulated to the downside, while Wall Street was accumulating shares. So in an effort to look for the same type of possible manipulation, here is the Model Portfolio's candidate for most-manipulated stock:
ABNB:
Honorable Mention: KKR.
Aggressive Portfolio:
The Aggressive Portfolio gained 0.10%, but still trailed 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:
My most-manipulated pick for the Aggressive Portfolio is DDOG:
Honorable Mention: LYV
Income Portfolio:
The Income Portfolio rose 1.76%, and was the only portfolio to beat the S&P 500 last week. Here's the updated inception-to-date chart of the portfolio:
Here are how the Income portfolio component stocks performed last week:
My most-manipulated pick for the Income Portfolio is M:
Honorable Mention: PFE
Strong AD Portfolio:
The Strong AD Portfolio declined 3.37%, badly lagging 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:
My most-manipulated pick for the Strong AD Portfolio is PRFT:
Honorable Mention: TW
Earnings Reaction Portfolio:
The Earnings Reaction Portfolio fell 2.73%, losing further ground to 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
Last weekend, I wrote about the approaching 4300 support, noting that an intraday move beneath that level and close above could establish critical neckline support and provide a short-term opportunity on the long side. Here was the chart that I published then and what it looks like now:
Right on cue, the S&P 500 bounced off that 4300 support, which occurred after the Monday intraday break of support, followed by a stunning recovery. After a couple more tests of 4300 support later in the week, the bulls finally got control of the action late Friday afternoon. So now the bulls have their opportunity. Can they do more than just print a right shoulder and test the 20-day EMA? That's currently at 4531. Given all the signs I'm seeing, I believe the most likely scenario from here is another move lower, breaking neckline support. If that does occur, the measurement on that breakdown would be another 500 points to 3800. It doesn't mean the selling would stop there, but that would be the initial target based on the head & shoulders measurement. If the bulls can keep the momentum going and the S&P 500 can close back above the 4550 level, a reassessment would be in order.
Model ETF Portfolio
Our Model ETF Portfolio fell 0.15%, slightly underperforming 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."