EB Weekly Portfolio Report - Sunday, February 26, 2023
No Weekly Portfolio Report Next Week
I will be out of the country on vacation from Friday, March 3rd through Friday, March 10th. As a result, there will be no EB Weekly Portfolio Report next weekend. The next EB Weekly Portfolio Report will be published on Sunday, March 12th.
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 27: None
Tuesday, February 28: None
Wednesday, March 1: None
Thursday, March 2: None
Friday, March 3: 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:
We had a bad week and our major indices' ETFs (SPY and QQQ) finished very close to the max pain levels calculated the week before? Was that what drove equity prices lower last week? It's hard to say, but I feel it was most definitely a factor. Remember, monthly options expiration can influence direction into the week following such expiration as options holders exercise in-the-money options. Market makers remain on the opposite side and can be monetarily influenced to keep pressure on prices for a period of time after expiration. Again, there's no way to tell if that occurred last week, but it's a possibility.
Anyhow, it was not a very good week. Not only did we move lower, but the short-term character of the market changed with prices on our major indices back beneath the 20-day EMA. Our best hope at this point, from a bullish perspective, is that we've entered into a period of profit taking and consolidation after the significant January rise. Consolidating with a later breakout above the early-February high would be extremely bullish, but we'll have to wait to see if the bulls are up to this challenge. In the meantime, the selling impacted mostly aggressive sectors last week:
It'll be important to watch to see how the aggressive sectors (XLK, XLY, and XLC primarily) trade during any further consolidation. I'd like to see outperformance by these three sectors - or at least performance that perhaps mirrors the S&P 500.
Model Portfolio:
The Model Portfolio declined 2.26% 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 5.25% 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 dropped 3.03% 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 fell 2.86% 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 rough week for equities, especially the more aggressive stocks that we featured as our 3 setups for last week. The three stocks were selected, expecting the key 20-day EMA to hold on our major indices. It didn't. As a result, many individual stocks saw similar breakdowns below support. The only saving graces were (1) keeping the number of setups low and (2) most of PDD's big loss coming at the opening bell on Monday (gapped down more than 7 bucks).
Let's give it another go, but this time with a few beaten-down portfolio stocks....
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.
Last week, I questioned whether we'd bounce off of key moving average support or perhaps move into a period of selling and consolidation. Well, it was the latter, so the technical hurdle has now been raised for the bulls. Also, further moves through 20-day EMAs would argue for further consolidation and trendless behavior.....until the February high is cleared.
Here are this week's Model Trade Setups, all from our Model and Aggressive Portfolios:
ABNB (Model Portfolio):
Gap and 20-day EMA support.
META (Model Portfolio):
20-day EMA test.
MSCI (Model Portfolio):
Price support test and approaching 50-day SMA.
HOLX (Model Portfolio):
50-day SMA test.
LSCC (Aggressive Portfolio):
20-day EMA test.
TTD (Aggressive Portfolio):
20-day EMA test.
TSCO (Aggressive Portfolio):
20-day EMA test.
Of the 7 trade setups above, only META has a questionable AD line. All others are clearly in uptrends, suggesting that Wall Street is buying these stocks on weakness.
The Week Ahead
All of last week's losses came during a bearish historical time of February and of the year. We know that the 19th-25th has historically been the weakest period of calendar months, and February has been no exception. February 2023 wasn't an exception either as last week (Feb 21-24) fell squarely in the middle of that bearish historical period and selling consumed U.S. equities.
Historically, equities turn much more bullish as we open March. Here are the annualized returns for March, breaking it down by the more bullish March 1-18 period, and then the more bearish March 19-31 period:
- March 1-18: +22.91%
- March 19-31: -0.46%
Based solely on seasonality, perhaps we'll see the bulls come to life next week, especially as March rolls in.
Happy trading!
Tom Bowley, Chief Market Strategist
EarningsBeats.com
"Better timing. Better trades."