EB Weekly Portfolio Report - Sunday, April 10, 2022
Earnings Dates for Portfolio Stocks
On each portfolio ChartList, I include the expected upcoming earnings date next to each stock's name. At the time these ChartLists are set up, I use "estimated" earnings dates. Now that we're closer to earnings season, I've gone through each of the 5 portfolio ChartLists and I've updated expected earnings dates for each portfolio stock - and many have changed. For instance, TSLA was shown to report earnings on 4/27, but that date has since been changed to 4/20 - according to the "Next Earnings Date" that StockCharts.com provides. I've updated all expected earnings dates on our portfolio ChartLists, but these dates will not automatically change in the ChartLists after you've downloaded them into your own StockCharts.com account. Therefore, if you want to make sure you have the latest earnings date information, you'll need to "re-download" these portfolio ChartLists into your StockCharts.com account.
I just want everyone to be aware of changes in earnings dates and not be caught by surprise.
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 11: None
Tuesday, April 12: None
Wednesday, April 13: None
Thursday, April 14: UNH, WFC
Friday, April 15: 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:
On Wednesday, we saw the heaviest volume on the S&P 500 since March's options expiration Friday. After gapping lower, the S&P 500 has been resilient at its 20-day EMA. Unfortunately, the SPX also can't seem to get through gap resistance at 4525, created by that heavy volume gap lower. I believe we're currently in a very narrow 4450-4525 trading range, as reflected below:
While the S&P 500 was only down by 1.27% last week, the rotation definitely has me worried in the short-term:
None of this provides any sort of guarantee, but it definitely suggests the highest probability short-term is for a decline this week. Until we see a close above 4525, I'd consider the trend to be lower.
Model Portfolio:
The Model Portfolio dropped 3.20%, 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:
The growth portion of our Model Portfolio took a pretty big hit last week and ON, a semiconductor ($DJUSSC), has quickly fallen to test a major area of gap support:
Relative strength remains in a solid uptrend. It's more about the industry group than it is about ON specifically.
Aggressive Portfolio:
The Aggressive Portfolio fell 3.36% last week, lagging the S&P 500. Here's the updated inception-to-date chart of the portfolio:
Here are how the Aggressive portfolio component stocks performed last week:
Similar to ON in the Model Portfolio, AOSL is also a semiconductor that took a big hit last week and is now at key price support:
Can it hold support? Can the semiconductors turn things around in the upcoming week. If we get two "No's", then AOSL likely heads to January support near 40.
Income Portfolio:
The Income Portfolio fell 1.31% last week, essentially mirroring the S&P 500. Here's the updated inception-to-date chart of the portfolio:
Here are how the Income portfolio component stocks performed last week:
Suddenly, railroads ($DJUSRR) cannot catch a bid as transport stocks ($TRAN) were hit hard last week. In just six trading sessions, UNP has fallen from all-time high to key intermediate-term price support:
Strong AD Portfolio:
The Strong AD Portfolio fell 4.31% last week, trailing 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:
RUTH bounced for the third time off of key price support at 20. Failure to hold that level opens the door to further downside:
Earnings Reaction Portfolio:
The Earnings Reaction Portfolio gained 0.77% last week, outperforming 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:
CF has been an excellent performer during a very tumultuous period for U.S. equities. But after a few "kick saves" at 20-day EMA support in the past month or so, traders should be careful here. Overhead price resistance was tested Friday at 110. Even if CF makes the break out, the PPO is now much lower than it was at the previous top, so a negative divergence is now in play:
I believe there's a reasonable chance we make this breakout. Just be careful if, subsequent to that breakout, CF sees a reversing candle (perhaps a bullish engulfing candle?) on heavy volume. I'd exit on any high volume, reversing candlestick given the sign of possible slowing price momentum.
Summary
Well, the selling returned to growth stocks and my sustainability ratios all took a fairly big hit. It's hard to be bullish when this occurs, so that has me leaning towards another down leg ahead. If we do have a leg lower and money begins to rotate back towards growth on a relative basis, then I'll likely expect any retest of the February low to be a great buying opportunity. Just keep in mind that you won't see strengthening growth stock on further selling. Instead, in this scenario, you'd see the relative strength of growth stocks remaining above the relative low set in February. This is how that might look on the following chart:
These key ratios in the bottom panels all look like they're going to break down to new relative lows again. I don't mind seeing these areas move lower on an absolute basis, but to begin thinking about a bottom, I'd like to see the S&P 500 move to new lows, while these relative ratios hold their prior lows. It doesn't look like this is going to happen just yet. It may require more selling and/or consolidation over the summer months first.
Model ETF Portfolio
Our Model ETF Portfolio lost % last 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."