EB Weekly Portfolio Report - Sunday, January 15, 2023
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, January 16: None
Tuesday, January 17: GS, UAL
Wednesday, January 18: None
Thursday, January 19: NFLX
Friday, January 20: 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 likely 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
- All portfolio stocks were announced on Thursday, November 17th, and were all entered into as of the close on Friday, November 18th for tracking purposes
- 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:
The S&P 500 posted a second consecutive strong week to open 2013, but the weekly chart below still shows much work to be done - just to end the year-long downtrend:
One positive note to make, however, is that January 2023 is already up 4.16% month-to-date. The top quadrant (25%) of Januarys since 1950 have resulted in excellent "balance of year" performance, averaging more than 15% gained from February through December in the same year as those strong Januarys. Right now, the worst January in that top quadrant was 1991's 4.15% gain. If January ends where we ended on Friday, it'll place us in that top quadrant. Just an FYI.
Model Portfolio:
The Model Portfolio gained 5.78% last week, crushing 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 5.82% last week, also crushing 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 climbed 0.52% last week, underperforming 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 climbed 2.36% last week, 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 components performed last week:
Model Trade Setups
I will provide Model Trade Setups 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. I may provide follow-up on some or all of these setups in the Daily Market Report (DMR). I'll also provide full disclosure, if I own any of the setups provided. Feel free to trade these Model Trade Setups based on the annotated charts provided, 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 Setups
Here were the setups provided last week and how they performed:
It was a solid week for U.S. equities, certainly making it much easier for stock picking. We had a very nice week as a result. Any time you have two setups cashing in at more than 10% in just one week, it's going to help the overall results. All 9 trades closed the week higher than where they finished the week prior and, cumulatively, performed much better than the benchmark S&P 500.
This Week's Setups
Every week, I will provide setups among our Portfolio stocks and our ChartList stocks. My preference is to trade Portfolio stocks, when appropriate. These stocks are in our portfolios for a reason - they're generally leaders within leading or improving industries.
One thing to keep in mind this week is that it's options-expiration week. That means that if the week gets off to a nice start, then risks will be growing for a reversal later in the week. I'll err a bit on the side of safety and caution, focusing on stocks that didn't participate in last week's rally.
Portfolio Stocks:
FCFS:
Trendline and 20-day EMA support being tested.
PEP:
Price support from November being tested. Defensive stock.
ZS (from RGCL):
Looks like a bottom to me. Positive divergence. Also, circled those last 6 trading days, where 5 finished almost squarely on the daily high, sending AD line to 52-week high. Aggressive stock, but I could see a quick move to 115-120.
WMG (from SECL):
I always talk about the risk of holding a stock with a negative divergence as a potential drop to the 50-day SMA looms. WMG quickly dropped to its 50-day SMA, but I like the hammer on the 50-day.
KNSA (from SECL):
Test of price support. Approaching trendline support.
The Week Ahead
Earnings season kicked off on Friday as JP Morgan (JPM) did about what I would have expected - beat consensus estimates as to both its quarterly revenues and EPS. That's what leading stocks in leading industry groups typically do. Looking ahead to this holiday-shortened week, there'll be a lot more financial companies reporting their quarterly results, including Morgan Stanley (MS), Goldman Sachs (GS), Charles Schwab (SCHW), PNC Financial (PNC), Truist Financial (TFC), and State Street (STT). Outside of financials, we'll see a few key reports from the likes of United Airlines (UAL), Netflix (NFLX), Proctor & Gamble (PG), and Schlumberger (SLB), among others.
We also will get the latest December PPI data on Wednesday morning at 8:30am ET. We won't hear the next Fed policy decision until their next meeting on January 31-February 1. In the meantime, we'll trade mostly off of technicals. Earlier I showed a key trendline on the S&P 500 that must be negotiated to truly begin to confirm a resumption of the near decade-long secular bull market. We've seen many industry groups turning much more bullish since the October 2022 bottom and another that I'm watching closely is banks ($DJUSBK). JPM reported excellent results on Friday morning and we saw a "sell on the news" in the morning as the DJUSBK fell back to test its now-rising 20-day EMA. The bounce was spectacular and now sights are likely set on clearing bottoming head & shoulders neckline resistance:
A breakout in the DJUSBK would simply add to the already-mounting bullish signals in so many other industries. Yes, the key aggressive sectors continue to struggle a bit, but it's important to note that the 2023 rally, thus far, has been led by the NASDAQ. The 10-year treasury yield ($TNX) is approaching its early-December low and the Volatility Index ($VIX) hit a 52-week low on Friday, closing at 18.35. That's the lowest close on the VIX since January 12, 2022, when it closed at 17.62. No bear market has continued once the VIX has moved below 16, so keep that number in mind.
Happy trading!
Tom Bowley, Chief Market Strategist
EarningsBeats.com
"Better timing. Better trades."