EB Weekly Portfolio Report - Sunday, February 12, 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 13: LSCC
Tuesday, February 14: None
Wednesday, February 15: None
Thursday, February 16: DBX, CROX
Friday, February 17: 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:
Last week, I began suggesting caution. I was hoping we'd get through one more week before options expiration began to kick in. I knew that 2023 had gotten off to a tremendous start, leaving a TON of net in-the-money call options on the table. Well, that may have started impacting market action in the second half of last week. Volume was lighter than usual, but still, down is down, and light volume doesn't make it any less costly. Weakness was centered much more around the hotter, aggressive areas as "Opposite George" week may have kicked in a bit early this month. For instance, to open February, we saw the communication services' (XLC) one-month rate of change (ROC) reach 22-23%. So I suppose we shouldn't be too shocked when we look at the 1-week performance of all sectors and see which one is on the bottom:
Internet stocks ($DJUSNS, -8.35%) had a particularly rough week. Was it option-related or profit taking? Or are we resuming the big 2022 slide in this industry group? I believe it's the former, but action over the next few weeks will help to either confirm or refute that belief.
Meanwhile, energy (XLE, +4.94%) benefited from a big increase in crude oil prices ($WTIC, +8.63%).
Model Portfolio:
The Model Portfolio fell back 0.84% 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 dropped 2.72% 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 rose 0.30% 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 1.80% 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:
We provided a much smaller list of setups last week - and for good reason. We've seen a big push higher in our major indices and a bit of profit taking wouldn't be a bad thing. I had mentioned last week that BYND was the type of stock (short squeeze candidate) that could move up 100% or down 50%. Well, it tried the latter, dropping more than 17% on the week. The other two performed much more in line with the overall market.
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 turned a bit more cautious last week with the number or setups as the market's mindset seemed to change to a "sell on the news" type of mentality. It's options-expiration week, so we need to be mindful of that and remain somewhat cautious, particularly as it relates to our major indices. But all of the following individual stock setups were provided in Friday's Daily Market Report (DMR). I tried to consider only those stocks that would not likely be impacted much by options expiration this week. Peloton (PTON) would be the one exception, but it's already fallen considerably from its recent high.
Here are this week's Model Trade Setups:
All Stocks From Raised Guidance ChartList (RGCL):
ZD:
ZD found price resistance near 94, but this pull back to its 20-day EMA provides a solid reward-to-risk trade opportunity here.
DT:
DT has significant gap support at 43.21.
HOLX:
HOLX did close just beneath its 20-day EMA, but I'm expecting it to rally back above it. Finished last week almost squarely on price support.
ITW:
ITW is testing both price and 20-day EMA support.
PTON:
PTON is testing key gap support.
TWOU:
TWOU rallied strongly on heavy volume from 9.83 gap support. We've come full circle with TWOU back to this level.
WNC:
I mistakenly referred to WNC as a bank stock on Friday. It wasn't the first time as the name makes it sound like a bank. It's part of the commercial vehicles & trucks group ($DJUSHR) within the industrials sector (XLI). I like the move down, approaching the 20-day EMA and testing the top of gap support.
The Week Ahead
I'll state the obvious first. It's options-expiration week and we've had a stellar rally to begin the year. While that's taken care of SOME of the net in-the-money call premium, there's still reason to be a bit worried as we open up this week. Further short-term selling would not be a shocker to me, but another 1-2% would wipe out much, if not all, of that net call premium. I'd consider leveraged ETFs at that point, if you prefer trading ETFs. I pointed out this past week that I'd grow much more bullish in the near-term if we see a 20-day EMA test. The reward to risk would certainly shift and begin to favor the longs, in my opinion.
The big news this week will be the January CPI, which will be released on Tuesday morning before the stock market opens. This is the report that was at the center of several extremely volatile stock market moves in 2022, so it'll keep traders on their toes. It could result in a rising VIX on Monday, in anticipation of the POTENTIAL for increased volatility.
I remain very bullish and believe the worst is behind us. I don't think that represents popular opinion, but I never try to go with the masses. I call what I see.
Happy trading!
Tom Bowley, Chief Market Strategist
EarningsBeats.com
"Better timing. Better trades."