EB Weekly Portfolio Report - Sunday, April 3, 2022

Tom Bowley - April 03, 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, April 4: None

Tuesday, April 5: None

Wednesday, April 6: None

Thursday, April 7: None

Friday, April 8: 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:

We were essentially flat last week on the S&P 500 as we gained just 0.06%. Under the surface, however, the recent market strength had Wall Street running for cover a bit as defensive sectors dominated:

The top four sectors were all defensive groups. Meanwhile, financials (XLF) took it on the chin as the 10-year treasury yield ($TNX) dropped 11 basis points to 2.38%. Crude oil prices ($WTIC, -12.84%) tumbled more than $14 per barrel back to $99.27. That took a toll on the energy space (XLE). Most other areas were near the flat line, though transportation stocks ($TRAN, -5.34%) weighed on industrials (XLI) as well. Truckers ($DJUSTK, -10.31%) were hit particularly hard and appear to have much more downside ahead based on this weekly chart:

The volume in 2022 has been extremely heavy to accompany the selling. We could see short-term strength as two key short-term price support levels approach, but the weekly PPO suggests the worst is not yet over.

Model Portfolio:

The Model Portfolio gained 0.81%, slightly 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:

TSLA had another solid week, but after gapping higher last week, it's found itself in a sideways "cluster". A gap lower and beneath this cluster would suggest an island cluster top (reversing pattern) is in place:

Aggressive Portfolio:

The Aggressive Portfolio fell 2.16% last week, lagging 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:

Semiconductors ($DJUSSC) had a very rough ending to last week and it showed across many of the individual names like AOSL. The uptrend in AOSL's AD line was broken, but absolute and relative price uptrends remain intact. The movement here is quite volatile, but I'd only grow more concerned if the absolute and relative price action breaks down:

Income Portfolio:

The Income Portfolio fell 0.82% last week, lagging 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:

Utilities (XLU, +3.74%) had a fabulous week and ED rallied alongside the group. Its AD line and relative strength are both very strong, but an overbought pullback could occur at any time. Support resides in the 88-90 range:

Strong AD Portfolio:

The Strong AD Portfolio climbed 0.86% last week, outperforming 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:

CALM and CNXC offset one another last week, one with a huge gain after earnings and the other with a huge loss after earnings. CALM's recent price move has been nearly parabolic and the chart begs of a bit of relief. But CNXC has gone from a very bullish ascending triangle pattern to a major test of intermediate-term support:

This is a "poster child" of what can happen holding ANY stock into its earnings report. This would be an area I'd expect to see CNXC bounce - even if it's only temporary.

Earnings Reaction Portfolio:

The Earnings Reaction Portfolio dropped 1.64% last week, underperforming 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

Up or down? Which way are we heading? Well, that's always a difficult question to answer as there are so many moving parts. I remain convinced that we are in a secular (long-term) bull market, so that tells me to be very careful on the short side and to keep stops in place. But we very well could be heading for another leg lower to possibly test the February low. All of a sudden last week, money rotated heavily back into defensive sectors. That, at a bare minimum, raises my eyebrows.

The March CPI report will be released the morning of Tuesday, April 12th, just seven trading days away. I believe that this will mark the top of inflation at the consumer level. Beginning with the April 2021 CPI report, monthly readings began to spike significantly. That means that the April 2022 reading (to be released during the second week of May), unless it really surges, should result in the annual rate dropping. Historically, the stock market has done very well when inflation tops and begins rolling over. So I do think the upcoming March CPI report creates additional risk. Whether the market can hold up under such conditions should tell us a lot about whether the February low is safe.

Model ETF Portfolio

Our Model ETF Portfolio lost 0.50% last week, 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."