EB Weekly Portfolio Report - Sunday, March 20, 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 21: None
Tuesday, March 22: None
Wednesday, March 23: None
Thursday, March 24: None
Friday, March 25: 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:
U.S. equities staged a huge rally last week as the S&P 500 gained a hearty 6.16% and that included a rough start to the week on Monday. It also featured leadership from two key sectors - consumer discretionary (XLY, +9.09%) and technology (XLK, +7.64%). All of that was excellent news given the horrendous start to 2022 that equities suffered. Technically, the big week looks similar to the week we saw in November 2020 to end the last significant period of market weakness:
It's also similar to the rebound off the pandemic-led March 2020 bottom. In both those prior cases, the rally was just the beginning of much, much more strength. Will that be the case now? Time will tell.
Model Portfolio:
The Model Portfolio surged 7.97%, easily outperforming the S&P 500 last week. 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 spiked 7.55% last week, 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:
Income Portfolio:
The Income Portfolio climbed 2.80% last week, but lagged 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 gained 4.31% last week, but underperformed 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 gained 1.98% last week, but came up well short of 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
So I discussed earlier the good news about last week's rally. You need to be aware of the flip side, however. Yes, we had a HUGE week last week. But there were an absolute TON of in-the-money puts on the table to start the week. In my Tuesday Max Pain webinar, I said it was the largest amount of net in-the-money put premium on the SPY and QQQ that I could ever recall. $5 billion worth as of Monday's close. And four days later, it was all gone. Every penny. POOF!!! Any bears who were celebrating their mountain of put profits on Monday continued to celebrate only if they sold those options. Otherwise, they vanished into thin air. It reminds us why we look at max pain every single month. It's THAT important.
Don't misunderstand me. It was awesome to see the market rally the way it did, but I believe the upcoming week's action will be much more important than last week's as there is no further financial incentive for market makers to manipulate prices higher in the very near-term. If we can continue to rally, it'll be because of normal demand vs. supply.
Model ETF Portfolio
Our Model ETF Portfolio gained 4.26% last week, but lagged 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."