EB Weekly Portfolio Report - Sunday, February 5, 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, February 6: ON
Tuesday, February 7: ENPH
Wednesday, February 8: None
Thursday, February 9: PEP, DXCM, IPG, DOCS
Friday, February 10: 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:
As discussed last Sunday, the multi-month downtrend was broken, a significant step in repairing the technical damage inflicted by the 2022 cyclical bear market. This past week saw us definitively break above the 4100-4110 price resistance range, adding further evidence to the resumption of the decade-long secular bull market. For those in the "we must see a higher high before declaring victory", 4300 will be the level to watch:
Any time you make a key price breakout, it's nice to have it confirmed by strength in the most aggressive sectors - technology (XLK), consumer discretionary (XLY), and communication services (XLC). Check out last week's leadership:
I can't find any reason to argue with this strength.
Model Portfolio:
The Model Portfolio jumped 2.36% 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 climbed 0.83% last week, 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 gained 1.32% 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 rose 2.61% last week, easily outperforming 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 another strong group of setups. BYND was extremely volatile, but that should always be expected from short squeeze stocks. Though CROX didn't show much of a gain, after hitting its 20-day EMA near 118-119, it spiked to a high of nearly 129 on Thursday. So there were plenty of opportunities on that one as well.
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.
I remained mostly on the offensive last week, albeit with fewer setups to respect the overhead price resistance between 4100-4110. After the "sell on the news" (AAPL, AMZN, GOOGL earnings) mentality of Friday, I think it's still best to think bullishly, but maintain a very small list of trade setups.
Here are this week's Model Trade Setups:
Portfolio Stocks:
MCD:
Ignore that hollow candle from January 24th. That was the day of the glitch. MCD has shown that 260-265 has been solid recent support and I think we'll see another bounce from this level.
Other ChartList stocks:
BYND (Short Squeeze ChartList):
This remains an incredibly aggressive trade as this stock could be down 50% on the week or up 100%, but it is holding up well and the short % of float is at 39%. Any strength this week and the short sellers could be back in panic mode.
FCX (from Strong Earnings ChartList):
The nonferrous metals group ($DJUSNF) has struggled recently, but FCX is a leader and I'd look for a rebound off its 20-day EMA test.
The Week Ahead
Many of the biggest earnings reports are now behind us and so is the Federal Reserve's latest FOMC meeting. Because of that, we saw the Volatility Index ($VIX) fall back to 18.33 after its Tuesday's high of 20.70. The VIX continues to weaken and history tells us this is very, very bullish. We've never had a secular bear market that saw the VIX drop below 16, so that's a number to keep watching over the next few weeks.
If we have another solid week, there will be two things to keep in mind. First, there'll be a TON of net in-the-money call premium to consider heading into options-expiration the following week. Also, history tells us that the first half of calendar quarters tend to perform much better than the second half. We've seen a massive advance thus far in 2023, so it wouldn't be shocking to see a pause after February 15th.
Happy trading!
Tom Bowley, Chief Market Strategist
EarningsBeats.com
"Better timing. Better trades."