EB Weekly Portfolio Report - Sunday, March 19, 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, March 20: None
Tuesday, March 21: None
Wednesday, March 22: None
Thursday, March 23: None
Friday, March 24: 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, February 16th, and were all entered into as of the close on Friday, February 17th 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:
Growth stocks took the lead last week. The NASDAQ jumped 4.41%. The NASDAQ 100 soared 5.83%. The iShares Russell 1000 Growth (IWF - large cap growth) gained more than 4.00%, while the iShares Russell 1000 Value (IWD - large cap value) fell 1.63%. The IWF:IWD ratio is rapidly approaching the August 2022 high and clearing that resistance would be very bullish for U.S. equities:
The above chart illustrates how important it is for growth stocks to perform better than value stocks. While there certainly is not perfect positive correlation, the blue-shaded area highlights the fact that correlation moves above +0.50 much more often than it moves below -0.50, which represents inverse correlation.
The 1.59-1.63 ratio level is formidable resistance, as evidenced by all the key pivots in this area. The bullish development would be to see this ratio break above 1.63, topping the August 2022 high. A move back down below 1.49 would clear both the 20-week EMA and 50-week SMA and the Q2 2022 low, a much more bearish development.
Sector performance last week was as follows:
That's quite the disparity. If you were invested in the right sectors, you probably enjoyed a great week. However, many value stocks are found in the bottom 4 sectors, and that took its toll on the S&P 500, especially vs. the more-growth oriented NASDAQ. Continuing banking issues obviously had a negative impact on financials, while crude oil prices ($WTIC) dropped 12.72% derailed energy. Meanwhile, the 10-year treasury yield ($TNX) fell 30 basis points last week, boosting many growth-related areas.
Model Portfolio:
The Model Portfolio dropped 0.17% last week, underperforming 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 rebounded 2.00% last week, outperforming 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 1.99% 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 gained 1.30% 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 not a great week to only have one aggressive growth stock. DDOG performed well as most aggressive growth stocks shot higher last week. Unfortunately, many other areas of the market didn't fare so well and that contributed to our lackluster performance overall.
We'll be looking exclusively at portfolio stocks for this week.
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.
Here are this week's Model Trade Setups, all from our three portfolios:
TDC (Model Portfolio):
TDC returned to gap support last week at 36.71 and is poised, in my opinion, to resume its earlier uptrend. TDC is a big relative leader in the tech space. How the stock market reacts to the latest Fed policy statement on Wednesday will go a long way in determining how our setups perform.
HOLX (Model Portfolio):
Not much has changed since last week, when we added HOLX to our trade setups. It remains almost squarely on key price support, so this is where I'd want to take a shot on the long side.
ACM (Aggressive Portfolio):
ACM has hit key price support. The best look technically would be an intraday breakdown with an afternoon recovery above price support. I like to trade false breakdowns when I see the afternoon recovery. That'll be something to keep an eye out for.
PAG (Income Portfolio):
Normally I'd steer clear of a stock breaking below its key moving averages, but in the hierarchy of technical indicators, nothing is more important than price support. PAG had a double top breakout to open February, prior to soaring the next few weeks. While it's been a painful plunge from 155 to 130, this is the area I'd look for a rebound.
The Week Ahead
Historically, the upcoming week is bad for two reasons. First, March 19-22 has produced annualized returns on the S&P 500 of -22.82% since 1950. Second, options expired on Friday of last week and the NASDAQ continued rising throughout much of the week. It's not unusual at all to see weakness during the week following monthly options-expiration Friday. But the clear wild card this week will be the Fed. The latest Fed meeting begins on Tuesday and ends with a policy statement on Wednesday. Banks ($DJUSBK) have lost nearly 22% of their entire index value over the past 10 trading sessions. Raising the fed funds rate, while seeing the longer-term 10-year treasury yield ($TNX) drop, puts further pressure on banks and can begin to affect their lending practices and credit availability to the public. It's yet another consideration the Fed must take into account in its interest rate decision.
February inflation reports were as expected or lower than expected, but most believe the Fed will raise rates another quarter point on Wednesday. If they do, I'll be watching my various intermarket relationships quite closely. Also, there will be few economic reports out next week and only one of significance prior to the Fed's rate decision - the February Existing Home Sales report. Home construction ($DJUSHB) rose just over 4% last week and isn't far from setting a new all-time high. I believe we're going to see that before the end of Q2.
Happy trading!
Tom Bowley, Chief Market Strategist
EarningsBeats.com
"Better timing. Better trades."