EB Weekly Portfolio Report - Sunday, May 14, 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 15: None

Tuesday, May 16: None

Wednesday, May 17: CSCO

Thursday, May 18: None

Friday, May 19: 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: -0.29%
• Model Portfolio: -1.51%
• Aggressive Portfolio: -4.37%
• Income Portfolio: -0.50%
• Model ETF Portfolio: +0.15%

Weekly Summary

Benchmark S&P 500:

Leadership was once again felt in the NASDAQ 100 index as large cap growth stocks paced the action. Communication services (XLC, +2.37%) was the easy winner last week, but consumer discretionary (XLY, +0.43%) was the only other sector in positive territory. The "risk on" environment continues, despite the lack of an S&P 500 breakout:

Until we see a breakout in one direction or the other of the obvious trading range from 4050-4179, there's really not much to do. We do continue to see a pattern of afternoon strength in our major indices, which leveraged ETF traders can take advantage of, if they so choose. Otherwise, let's remain patient and see which way this consolidation pattern breaks.

Model Portfolio:

The Model Portfolio fell 1.51% 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 4.37% last week, badly 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 0.50% 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 0.15% last week, 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

We only had two trade candidates last week, as we await a more meaningful breakout on the S&P 500. Trading too often in a sideways, consolidating, whipsaw market can be costly. We allowed two of our trades from the prior week to carry over into last week - one has worked out fairly well, the other one not so much. Here's where they currently stand:

ROK:

ROK lost 3.66% last week and violated both price support and relative price support. It did bounce back on Thursday and Friday, so perhaps it'll run from here. Still, it didn't act the way we were expecting, so taking a loss of 3-4% would seem reasonable.

EPAC:

EPAC is up maybe 2% from where we originally discussed it. I like the close above the 20-day EMA and believe we have a decent shot at 25.00-25.25 to test the declining 50-day SMA. That's one of the tests I look for after a positive divergence prints. The other is a PPO centerline test. We have a bit more work to do there. I'd certainly take profits on any move above 25.00. Let's hold this one for one more 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.

On Tuesday afternoon, we'll be hosting our monthly Max Pain event. Let's see how the stock market performs on Monday and Tuesday, and then possibly trade based on max pain on Tuesday. I would definitely try to avoid stocks that have been strong recently as there could be substantial net in-the-money call premium that could influence market makers to drive prices a bit lower in the short-term. The next week to ten days can be difficult historically, because of options expiration and max pain.

The Week Ahead

Keep watching the growth vs. value story.

Last week was another week where we saw large cap growth dominate on a relative basis. But even among smaller and mid-size companies, growth is dominating value. Small and mid caps, however, are badly lagging their large cap counterparts. This chart will help to explain what happened last week and what's been happening in the stock market in 2023:

Notice that the growth vs. value ratios ALL show tremendous relative strength among growth stocks. The problem is that among both small and mid caps, both growth and value are going lower. But Wall Street's preference is still clearly growth over value.

It's very difficult to get bearish when money is rotating into growth (vs. value) among the large, mid, and small cap asset classes. Most who are discussing small cap and mid cap performance, which admittedly has been weak, are paying no attention to the rotation into growth - even at the mid and small cap level. I believe this is bullish, but being hidden by the fact that much more money is moving into the large cap growth stocks.

Happy trading!

Tom Bowley, Chief Market Strategist

EarningsBeats.com

"Better timing. Better trades."