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 24: None
Tuesday, April 25: MSCI
Wednesday, April 26: META
Thursday, April 27: TSCO, CROX, GWW, FICO
Friday, April 28: 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:
Last week was April monthly options-expiration week, or Opposite George week as I like to call it. It's the week where we often see strength in previously-weak sectors and weakness in previously-strong sectors. Much of it, in my opinion, is due to options expiring and market makers having financial incentive to drive prices towards "max pain" levels. Max pain refers to the price point where the most pain is inflicted on options traders. Let's check out last week's winning and losing sectors:
Notice that the two sectors - real estate (XLRE) and financials (XLF) - with the lowest SCTR scores are among the top-performing sectors. And two of the sectors - technology (XLK) and communication services (XLC) - with high SCTR scores are planted at the bottom performers for the week. Welcome to Opposite George week!
Technically, it was always going to be difficult for U.S. equities. I like to follow the NASDAQ 100 ($NDX) and heading into last week, the NDX was up against its February price high. Resistance held during the week and the NDX struggled - though there wasn't much selling either:
On Friday, we tested the rising 20-day EMA and successfully held it. This will be one key moving average to watch as we open up the last trading week of April.
Model Portfolio:
The Model Portfolio rose 0.55% 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 lost 0.20% last week, slightly 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 0.64% 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 0.06% last week, slightly 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
For the first time in 2023, I did not provide any weekly setups last week. Given options expiration and the tendency for prices to move lower from the 19th to 25th of calendar months, and overhead price resistance on our key indices, it seemed the risks were stacked against long positions. And, personally, I don't like trading stocks on the short side when I believe we're resuming a secular bull market. I realize that we will absolutely pull back from time to time, but I look at that weakness as an opportunity to buy stocks cheaper rather than cashing in on the weakness itself. It's just my preferred style of trading.
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 a few portfolio stocks that I like this week, but keep in mind that the Monday after monthly options expire has historically been our worst trading day. Consider using any short-term weakness on Monday, or even Tuesday, as an opportunity to buy stocks.
META:
You can trade META this week, but just be aware that the options effect could hurt the stock early this week, then earnings will be released on Wednesday. Personally, I expect earnings will be very good as META has been a leading internet stock for months now. I will not be at all surprised if META breaks above its recent highs after earnings are released. But it will be a risky week, so just keep position size in mind.
LSCC:
We were burned with the recent 50-day SMA test of CRUS two weeks ago, but historically buying leaders on tests of key moving averages has been an excellent trading strategy. A close below 88.50 would be a short-term warning for me.
TSLA:
This one didn't work out for us three weeks ago, but it's continued to fall and is now at a very important gap support level. I believe we'll see a rebound from here, but we may need to weather some selling early this week. We'll see.
The Week Ahead
We've been through just over a week of earnings season, but most reports have been in the financial services area, which we knew would be tough. The stock market has flown higher in the first quarter, because of the aggressive sectors - technology (XLK), consumer discretionary (XLY), and communication services (XLC). It's those earnings reports that are likely going to either be strong or provide improved guidance. There's a reason why Wall Street firms have poured their resources into these areas and I believe we'll find out why with earnings. It's also important to keep seasonality in mind. Growth-oriented stocks tend to have their best relative showing vs. value-oriented stocks beginning in May and running through August. Check out the relative seasonal performance of the XLK (vs. the SPY) over the next four months:
If you add the bottom numbers of each calendar month (represents average monthly outperformance of XLK vs. SPY since 2013), it totals 5.8%. That means that the XLK has averaged outperforming the SPY by 5.8% per year since this secular bull market began in 2013. If you add up just the four months from May through August, you'll find that it totals 3.7%. That means that 60% of the XLK's relative outperformance occurs during just 33% of the year (May through August). Technical indications suggest the market is going to head higher, led by technology. Seasonality supports this notion.
We'll likely find out whether that's the case over the next few weeks as the big tech leaders like AAPL and MSFT report their quarterly results.
Happy trading!
Tom Bowley, Chief Market Strategist
EarningsBeats.com
"Better timing. Better trades."