EB Weekly Portfolio Report - Sunday, October 23, 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, October 24: CDNS
Tuesday, October 25: TXN, UPS, ENPH
Wednesday, October 26: ADP, WM, WOLF, MUSA,
Thursday, October 27: AAPL, RSG, DECK
Friday, October 28: GWW
PLEASE NOTE: The above companies were provided using 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 typically 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, August 19th
- 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:
- The Income Portfolio should have the least amount of volatility as it will typically be comprised of quality large cap stocks with solid dividends
- The Model and Aggressive Portfolios should be viewed similar to aggressive growth funds; they will typically have a lot of volatility and periodic drawdowns can be significant from time to time
- 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 two; 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
- 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:
It was options expiration week last week and there were tons of net in-the-money put premium, suggesting that we'd likely see a rally. That's exactly what we saw as the S&P 500 jumped 4.74% on the week. The NASDAQ popped 5.22%. Many of the underwater options were found in the technology (XLK) and consumer discretionary (XLY) sectors and these two sectors climbed 6.46% and 5.27%, respectively. Semiconductors ($DJUSSC, +7.73%), one of the groups most in need of a rally, suddenly surged higher last week to test its 20-day EMA:
Given the slight positive divergence, semiconductors could be poised for another strong week ahead. But the bulls will have to face some strong historical headwinds.
Model Portfolio:
The Model Portfolio climbed 5.46% last week, 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:
Aggressive Portfolio:
The Aggressive Portfolio surged 7.37% 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 rose 5.19% last week, outperforming 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:
Model ETF Portfolio
Our Model ETF Portfolio jumped 4.44% last week, but underperformed the S&P 500.
Here's the updated inception-to-date chart of the Model ETF Portfolio:
Here are how the Model ETF Portfolio components performed last week:
Model Trades
I will provide Model Trades each week in this Weekly Portfolio Report, which will simply be to outline possible trades based on key support, resistance, relative strength, and where these trades come from. For instance, my trading strategy for Strong AD ChartList (SADCL) stocks might be completely different than my trading strategy on Strong Earnings ChartList (SECL) stocks. Obviously, it would be different from a Short Squeeze ChartList (SSCL) trading candidate. I'll lay out the annotated chart and my reasoning for the (potential) trade. In the following week's EB Weekly Portfolio Report, I'll grade each of the prior week's Model Trades. Grades will generally be based on how these trades performed relative to the S&P 500. Feel free to trade these stocks in a similar manner or according to your own trading strategy. Or ignore them. It's completely up to you. I am not a Registered Investment Advisor (nor is EarningsBeats.com). THESE TRADING CANDIDATES SHOULD NOT BE VIEWED AS INVESTMENT ADVICE.
I view EarningsBeats.com as a market research, market guidance, and market education platform. We do not attempt, in any fashion, to manage anyone's money. We have no idea the risk tolerance of each of our members, nor do we have any idea of your financial goals and objectives. It would be irresponsible for us to provide advice to any of our members. Therefore, please consult your own financial advisor before considering any buy/sell decisions. You are completely responsible for the financial decisions that you make.
Last week's featured Model Trades
We closed out all Model Trades last week and, unfortunately, they came with losses as stops were triggered. I'll report on these trades on Monday in our Daily Market Report (DMR). For now, we're simply going to watch the action and, if we see a solid reward to risk trade, we'll point it out in our DMRs this week.
The Week Ahead
If it weren't for the historical headwinds that we're facing this week, I'd be extremely bullish. I loved the way we finished last week and, based upon the positive divergences on the hourly, daily, and weekly charts, I'd be looking for further strength. The biggest fundamental headwind is the 10-year treasury yield ($TNX). Last week's jump from 4.01% to 4.21% did little to slow down the U.S. equities advance, but we know that market makers likely wanted to see higher prices, so it's difficult to be overly bullish. Nonetheless, up is up and equities trended mostly higher last week.
The QQQ (ETF that tracks the NASDAQ 100) closed above its 20-day EMA on Friday for only the third time since mid-August. The last two "breakouts" were one-day failures - the first came the day before Fed Chief Powell's Jackson Hole speech (think "more pain ahead") and the second was the day before the hot August CPI reading. There's little economic news on Monday, though quarterly earnings reports will gain steam in the week ahead. Cadence Design (CDNS) and Microsoft (MSFT) will report results on Monday and Tuesday, respectively, potentially providing a catalyst for software stocks ($DJUSSW) specifically, but the NASDAQ in general. Based on potential 50-day SMA tests after positive divergences, CDNS and MSFT could most certainly provide this influential industry group a lift. They both remain relative leaders in the space.
Happy trading!
Tom Bowley, Chief Market Strategist
EarningsBeats.com
"Better timing. Better trades."