EB Weekly Portfolio Report - Sunday, March 6, 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, March 7: None
Tuesday, March 8: None
Wednesday, March 9: None
Thursday, March 10: None
Friday, March 11: None
PLEASE NOTE: The above companies were provided using earnings dates provided by StockCharts.com. My research is limited to what StockCharts.com provides and I also can make a mistake from time to time, so please double check for earnings dates for all companies that you own from a reputable source like Zacks.com. 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, February 18th; members may choose to try to time better entries, but EB.com "purchased" as of February 18th's closing prices
- Primary objective is to outperform the benchmark S&P 500 over time; quarter-to-quarter performance can be extremely volatile, especially if significant rotation takes place intra-quarter
Here are several considerations for EB members:
- I would expect the Aggressive, Strong AD, and Earnings Reactions 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. The Earnings Reactions portfolio is based on strong accumulation the day after its quarterly earnings are released and solid relative strength (vs. its peers). These are the only two portfolios that do NOT require revenue and EPS beats in their most recent quarterly earnings reports
- 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 four; 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 and the November 2021 to February 2022 periods 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:
One week after staging a big recovery off its 4114.65 low, the S&P 500 again failed to build on that strength, finishing last week down 1.27%. Technically, the biggest development was the channel resistance test (and failure) on both the S&P 500 and NASDAQ 100. Here's a quick look:
We must respect these channels until resistance is cleared.
Model Portfolio:
The Model Portfolio fell 3.78%, failing to keep up with 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:
WFC had a rough week, but it's just now testing key trendline support and it's been a huge relative winner in the banking area. Most banks took a hit last week was treasury yields fell, but I believe WFC will continue to lead within its space:
Aggressive Portfolio:
The Aggressive Portfolio dropped 0.93% last week, slightly outperforming 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:
The bifurcation within our portfolios was extreme last week as we saw many big winners and big losers, but they mostly offset one another. AXP was one of the weak performers and it's approaching two key price levels where I'd expect to see buyers step back in:
Income Portfolio:
The Income Portfolio gained 1.30%, easily beating 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:
MET was the worst performer in this portfolio, but it closed almost squarely on recent price support, so perhaps we'll see a rebound here:
Strong AD Portfolio:
The Strong AD Portfolio fell 1.41% last week, slightly underperforming 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:
EXPE has been the poster child for extreme volatility. After touching 217 on February 16th to set an all-time price high, EXPE lost just over 20% (bear market territory) in the past 11 trading sessions and bulls are now hoping that channel support holds:
When you look at that EXPE:$DJUSTT relative ratio, it's apparent that EXPE is going down because of its industry group. It's a clear case of the "baby being thrown out with the bath water." This is not uncommon at all in a cyclical bear market. Many times, there's indiscriminate selling.
Earnings Reaction Portfolio:
The Earnings Reaction Portfolio climbed 2.70% last week, having a solid week relative to the S&P 500. Here's the updated inception-to-date chart of the portfolio:
Here are how the Earnings Reaction portfolio component stocks performed last week:
WAB was down a bit last week, but remains in a rectangular consolidation pattern right now:
There appears to be a lot of accumulation while the stock consolidates. That AD line has to be one of the strongest I've seen in the stock market and it's occurred with increasing volume in the stock as well - a bullish signal indeed.
Summary
Where do we go from here? It's hard to feel very bullish. Obviously, there's a ton of bad news out there that the media continues to jump all over. This week, the February CPI report will be front and center. And the Fed is living in their own little fantasy world. If they cannot see the signs of a potential recession ahead, I could point out a few to them, not the least of which are crude oil prices ($WTIC) that are absolutely soaring.
I'm watching the U.S. Dollar Index ($USD) also break out to the upside, which is very strange. Rarely do we see gold, crude oil, AND the dollar all breaking out together, but this pandemic has created a number of weird occurrences the past two years, so why not have another one? I'll say this. If the USD keeps forging to new highs, any future reduction in fear (think a falling VIX) will not bode well at all for gold ($GOLD). I think gold is fine for now on the long side, but I'd definitely consider selling bits and pieces during periods of strength because of similar strength in the dollar.
The VIX closed last week near 32 and we're not even breaking down yet. I honestly am not sure if that's bullish or bearish, but I'm going to side with the latter since the trend is clearly lower right now and the uncertainties are mounting.
Model ETF Portfolio
Our Model ETF Portfolio gained 0.40%, easily outpacing the benchmark S&P 500 for the week.
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."