EB Weekly Portfolio Report - Sunday, November 6, 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, November 7: None
Tuesday, November 8: LMND, NXST
Wednesday, November 9: CELH
Thursday, November 10: None
Friday, November 11: None
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 not a good week on a few different fronts. The Federal Reserve chose to hike rates 75 basis points once again. This was expected, but the Fed did raise its expectations on where interest rates may ultimately head. That hawkish tone sent U.S. equity prices tumbling on Wednesday afternoon, once again punishing growth-oriented stocks much harsher than its value counterparts:
The last several Fed meetings and inflation reports have spooked stock traders, so it wasn't all that surprising to see traders moving away from growth-oriented stocks as the 2pm Fed announcement approached. Once the announcement was made, however, it's very easy to see that growth stocks were sold MUCH harder than value stocks. Another way to look at the rotation is by reviewing the weekly sector performance:
That is significant underperformance by the three key aggressive sectors. I still do not believe the weakness has anything to do with the market's fear of long-term inflation issues. I discuss later in this report how the action in the dollar ($USD) and gold ($GOLD) simply don't support that narrative. However, I DO believe this has everything to do with the short-term direction of interest rates. The fact that the Fed indicated it expects the fed funds rate to move higher than it previously expected took its toll on growth stocks.
Model Portfolio:
The Model Portfolio dropped 2.70% 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 tumbled 7.52% last week, badly underperforming 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 fell 3.04% 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 lost 1.90% last week, but outperformed 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 decided against adding new Model Trades last week, instead waiting to see if we would be able to negotiate key 3900 price resistance on the S&P 500. We weren't able to do that. As a result, individual stocks were not considered appropriate. We'll simply await better market conditions to avoid the whipsaw action that many stocks are currently suffering from. Given the S&P 500 drop of more than 3%, I believe it proved to be a wise decision.
The Week Ahead
I continue to watch for signals that Wall Street firms are taking the threat of inflation more seriously. I'm just not seeing it. Gold ($GOLD) is perhaps the best hedge against inflation as inflation will typically erode the value of a currency. As you can see from the chart below, the U.S. dollar ($USD) has been in a massive uptrend and GOLD, since its denominated in dollars, usually moves opposite that currency:
The dollar's strength has clearly had a negative effect on gold and I'd keep a very close eye on the 0.41 relative support level. A close beneath that would likely result in much further relative weakness in gold ahead. Finally, that bottom panel shows the significant tendency for gold and the dollar to move inversely to one another.
There will be a slew of earnings out again this week, but all eyes will be on the October CPI, which will be released on Thursday morning. Currently, consensus estimates point to a 0.5% increase. Expect a big move in one direction or the other if the actual number departs much from this estimate.
Happy trading!
Tom Bowley, Chief Market Strategist
EarningsBeats.com
"Better timing. Better trades."