EB Weekly Portfolio Report - Sunday, April 9, 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, April 10: None
Tuesday, April 11: None
Wednesday, April 12: None
Thursday, April 13: None
Friday, April 14: JPM
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:
The S&P 500 was flat last week, but various sectors were quite volatile. The majority of the strength was found in defensive- and value-oriented stocks, while key leaders in 2023 like automobiles ($DJUSAU, -9.63%), renewable energy ($DWCREE, -6.48%), and semiconductors ($DJUSSC, -4.16%) all fell rather significantly. But, as we've seen throughout the past year or more, much of this "selling" took place at the opening bell. Roughly two-thirds of last week's drop in the DJUSSC occurred at the opening bell with very little follow through intraday. Internet ($DJUSNS, +2.96%) was one strong aggressive industry group, though, breaking out above key price resistance at 2500:
Internet stocks were certainly a bright spot.
Meanwhile, health care stocks (XLV, +3.14%) gained ground, particularly health care providers ($DJUSHP, +6.05%) and pharmaceuticals ($DJUSPR, +4.78%). The latter bounced beautifully off price support:
Model Portfolio:
The Model Portfolio fell 3.59% 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 tumbled 3.51% 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 2.68% 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 lost 1.17% 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:
Clearly, the ABNB and TSLA trades were awful last week. I was surprised by the TSLA drop, given that it reports quarterly results on April 19th and TSLA has a history of moving higher into earnings. ABNB, however, was the bigger surprise for me as it had just begun to turn back up off of its 50-day SMA and looked poised for a big advance. ABNB fell all the way back to test a critical gap support level at 108.87 from February 10th. With its RSI now just below 40, ABNB needs a solid week ahead to regain its footing.
The other 4 trades are about what I'd have expected during a mostly flat 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. I still remain quite bullish heading into earnings season, but I'd remain slightly cautious with bank earnings on deck. Therefore, I'll keep it close to the vest with 3 portfolio stocks:
From Portfolios:
CRUS (Model Portfolio):
50-day SMA test.
GWW (Model Portfolio):
Gap support test.
TSCO (Aggressive Portfolio):
20-day EMA test after recent price breakout.
The Week Ahead
I wrote about the absolute and relative strength of technology (XLK) last week, but year-to-date, communication services (XLC) has been the best sector. And things are about to get really exciting for the group IF it can clear neckline resistance in its bottoming reverse head & shoulders pattern:
This is a pretty big deal, because the XLC has emerged as a strong leader in 2023, after falling throughout much of the previous 18 months. A key absolute breakout on top of the relative strength being shown would add a lot of bullishness to an already bullish 3-month run.
Let's not forget that earnings season is just around the corner. We'll get our first glimpse of earnings from JP Morgan (JPM) on Friday, April 14th, followed by many banks and other financials over the next week or two. I believe the banks ($DJUSBK) are likely to be one of the worst areas of the market (in terms of earnings) as they must deal with a nasty inverted yield curve. Even if the current quarter's earnings are not heavily impacted, there definitely could be some very cautious comments from banks for next quarter and potentially through year end.
History is on the side of the bulls - at least through options expiration Friday in May. If we remain strong through that date, then we could see a more pronounced drop.
Happy trading!
Tom Bowley, Chief Market Strategist
EarningsBeats.com
"Better timing. Better trades."