EB Weekly Portfolio Report - Sunday, June 5, 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, June 6: None
Tuesday, June 7: None
Wednesday, June 8: None
Thursday, June 9: None
Friday, June10: 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:
Last week was a familiar one, if you're comparing it to others in 2022. Energy was up and everything else....well, not so much. Here's a quick look at last week's sector performance:
Despite the lower prices in 9 of 11 sectors, it wasn't a bad week technically. The S&P 500 traded above the now-rising 20-day EMA all week, so until that is lost, there's a bit of a short-term bullish bias:
The black arrow marks the key 20-day EMA to watch short-term. The bullish "trend" day on Thursday actually broke through short-term price resistance, only to fail. In the very near-term, I see 20-day EMA support at 4083 as key for the bulls and closing price resistance at 4177 as key for the bears. That's roughly a 100-point range. Which breaks first? That'll give us a clue about the market's direction in the upcoming week.
Model Portfolio:
The Model Portfolio gained 0.29%, outperforming 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:
NFE was able to clear overhead price resistance and did so with expanding volume, a bullish development:
The bullish ascending triangle breakout offers us a potential measurement. From the top of the triangle to the bottom is roughly 10 dollars here. That suggests the breakout from 48 will measure to approximately 58.
Aggressive Portfolio:
The Aggressive Portfolio rose 1.00%, 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:
KMB recently tested price resistance near 144 and has pulled back to test gap support. I'm looking for the uptrend off the March low to resume. That resumption is confirmed, in my opinion, with a breakout above 136:
Income Portfolio:
The Income Portfolio lost 0.79%, but outperformed 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:
BCE appears poised to strengthen, but it needs a breakout above 55 to trigger the move:
Despite the scary drop in April/May, BCE's technicals all look pretty solid. A close above 55 would likely be accompanied by the PPO clearing centerline resistance and with a new AD high. BCE's relative strength vs. its peers has also turned higher.
Strong AD Portfolio:
The Strong AD Portfolio dropped 0.43%, but outperformed 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:
HPQ was a leader last week and, with a bit more strength, could see acceleration to the upside:
Right now, if I were to pick a computer hardware ($DJUSCR) stock to own, it wouldn't be Apple (AAPL). It'd be HPQ.
Earnings Reaction Portfolio:
The Earnings Reaction Portfolio fell 1.97%, our only portfolio to trail 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:
NRG underperformed its peer group last week, but there's technical reason to believe that could change this week:
NRG broke out above price support from August 2021 on very heavy volume during the month of May, when NRG exploded higher. Last week's selling simply brought NRG back closer to price support near 44.50. The rising 20-day EMA is at 44.33, which would likely offer up great support in the event NRG starts the week with a bit more selling.
The Week Ahead
It's still confusing. There are no definitive signs of a bottom being in place. That could develop if we move lower again and money rotates more aggressively, but we need to see it first. We can't assume that will happen. In the meantime, one rather ominous sign is that our portfolios are outperforming the benchmark S&P 500 during the recent rally. While that's good for our portfolios, it's ominous for the stock market, because we took a very defensive approach to our portfolios this quarter - at least to start the quarter. I reserved the right to switch out our portfolio to more growth-oriented stocks, if conditions suggested we should. If the rotation begins to favor more growth-oriented companies and the stock market rallies, we should underperform. The fact that we're not is a sign that the stock market isn't quite ready for a sustained upside move.
Earlier, I indicated that the rising 20-day EMA is a key short-term support on the S&P 500 - and it is. But if we fail to hold that support, here's a 5-year weekly chart to help identify key support levels to watch in the weeks ahead:
Listen, I want to call this bottom soooo bad, but I indicated at the beginning of the year that patience would be critical. While I believe that buying at the current level will prove to be an excellent investment, it's more likely than not that a better entry opportunity awaits.
Model ETF Portfolio
Our Model ETF Portfolio fell 1.36% 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."