EB Weekly Portfolio Report - Sunday, May 7, 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, May 8: ACM
Tuesday, May 9: ABNB, TDG
Wednesday, May 10: TTD, SONO
Thursday, May 11: None
Friday, May 12: 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:
- S&P 500: -0.80%
- Model Portfolio: -0.70%
- Aggressive Portfolio: +0.27%
- Income Portfolio: -0.51%
- Model ETF Portfolio: -0.73%
Weekly Summary
Benchmark S&P 500:
It was a decent week for U.S. equities, considering that we basically sold off for four straight days to challenge key support before rallying strongly on Friday. Apple's (AAPL) quarterly earnings were better than expected on Thursday after the bell to help offset significant selling that took place after the Fed decision to raise the fed funds rate by another 25 basis points on Wednesday afternoon. The good news, however, was the hint that the Fed is ready to pause. In my opinion, the rally that we've seen since October was at least partly based on the idea that the Fed would pause in 2023, and begin considering lower rates later in 2023 or early 2024.
Transportation stocks ($TRAN, +0.72%) were among the best performers last week and it'll be interesting to see if that's a theme that strengthens throughout the balance of 2023. The prospect of potentially-lower rates ahead would be expected to help strengthen the U.S. economy. That should bolster transports, so watching this group in the weeks ahead could be a barometer in gauging the market's expectations for lower rates ahead.
Model Portfolio:
The Model Portfolio fell 0.70% last week, slightly 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 gained 0.27%% 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 dropped 0.51% 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 fell 0.73% 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
I provided 4 trade setups last week, still keeping the number of setups fairly light as our major indices work through a trading range. While the NASDAQ did actually close at a fresh, new 2023 high, the S&P 500 remains stuck in its trading range. Here are the four stocks I provided last week:
ORCL:
ORCL had been uptrending and just tested its 20-day EMA. It was a solid short-term trade as it broke out on Friday to close up 2.38% for the week - well ahead of the S&P 500's drop of -0.80%.
RLI:
I expected RLI to hold the top of gap support. Not only did RLI fail to do that, but it also failed to hold price support and its rising 20-day EMA. One reason we might see a rebound, however, was that last week's selling was on fairly light volume. Nonetheless, it finished down 1.26%, slightly more than the S&P 500.
ROK:
ROK had gapped up and out of a bullish wedge heading into last week. While it pulled back early in the week, Friday's recovery left ROK (+0.00%) exactly flat for the week, but beating the S&P 500. This one still looks like a solid trade, so we'll hold it for another week.
EPAC:
EPAC actually reached price support this week and is bouncing with a positive divergence still in play. EPAC fell 0.29% for the week, but did outperform the S&P 500 slightly. It also tested its 50-week SMA. I still like the trade, so we'll keep it another 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.
We're still battling some overhead price resistance, especially on our benchmark S&P 500. Also, we're moving out of the bullish first week of May. Therefore, we'll just go with the two setups that are carrying over from last week, ROK and EPAC.
The Week Ahead
It'll be another week loaded with quarterly earnings reports, then we'll begin to see a noticeable drop in the number of key earnings after that. Several Aggressive Portfolio stocks report this week, which is likely to prove quite telling on whether this lagging Portfolio can make up ground before our next Portfolio Draft in a couple weeks.
For me, I'll be watching the S&P 500 price resistance level at 4179. Clearing that would be the latest positive for U.S. equities in their continuing quest for higher prices. Also, I'll keep watching the semiconductors ($DJUSSC), which managed to gain 1% last week, holding that critical support range from 7200-7400. Its very strong day on Friday (+2.77%) gave it much-needed breathing room as the group finished above both its 20-day EMA and 50-day SMA at 7558.
Happy trading!
Tom Bowley, Chief Market Strategist
EarningsBeats.com
"Better timing. Better trades."