EB Weekly Portfolio Report - Monday, June 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, June 19: Market Closed
Tuesday, June 20: None
Wednesday, June 21: None
Thursday, June 22: None
Friday, June 23: 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, May 18th, and were all entered into as of the close on Friday, May 19th 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: +2.58%
- Model Portfolio: +1.89%
- Aggressive Portfolio: +1.27%
- Income Portfolio: +2.33%
- Model ETF Portfolio: +3.25%
Weekly Summary
Benchmark S&P 500:
The S&P 500 ($SPX, +2.58%) had another stellar week, despite the caution surrounding June monthly options expiration on Friday. The more volatile NASDAQ 100 ($NDX, +3.82%) was up even more. Semiconductors ($DJUSSC, +6.20%) surged to all-time highs and software ($DJUSSW, +5.02%) isn't too far behind. Here's how the 11 sectors performed for the week:
We normally expect options-expiration week to be "Opposite George" week, but there was very little of that. Volumes stayed fairly high, which never really allowed for much market maker manipulation. Perhaps we'll see some of that in the upcoming week. You can look at the SCTR scores and see that sectors with poor recent relative strength (low SCTR scores) continued to perform poorly on a relative basis, while hot sectors remained hot.
Secular bull markets can confound us all at times and I believe last week was one of those times.
Model Portfolio:
The Model Portfolio rose 1.89% 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 gained 1.27% 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 climbed 2.33% last week, slightly 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 3.25% 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 decided to be very cautious heading into June monthly options-expiration week. Accordingly, we had no active trades heading into the week, instead closing them all out and taking profits in most of them.
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.
Technology stocks remain very strong, but we must consider the large risk of entering many of these stocks right now due to their overbought conditions and potential max-pain-related selling to open the week. Therefore, I'd rather focus on a few stocks that could present solid reward opportunities, but with much lesser risk.
WSM (Raised Guidance ChartList):
I like the recent price breakout and the bullish PPO centerline crossover. I'm seeing what I believe could be the start of a significant uptrend. Price support and the rising 20-day EMA should offer up nice support at 122.50 and 122.00, respectively.
HAE (Strong Earnings and Raised Guidance ChartLists):
One thing this chart doesn't show is that HAE's peer group - medical supplies ($DJUSMS) - broke out late last week from a bullish ascending triangle. I see further strength ahead in this industry group and we can keep a tight stop here in the 80-81 area.
PLUG (Raised Guidance ChartList):
Ok, I know I said I wanted to avoid risk and PLUG carries a LOT of risk, but I'm seeing a number of real positives building on this chart. Have we just pulled back into the right shoulder of a bottoming head & shoulders pattern? PLUG's relative strength vs. its renewable energy peers ($DWCREE) just touched a multi-month high. Its bullish momentum (rising PPO) hasn't been this strong in nearly a year. Volume has expanded, supporting this upside move. Yes, the weak AD line makes me nervous, but most signals are bullish. I like PLUG from its current price down to 10.00.
EW (Strong Earnings ChartList):
EW is a very strong medical supplies company. Remember, I pointed out above that the medical supplies group just broke out. And EW is a leader, just breaking out as well. I like entry right here and would add in the 89.50-90.00 area.
The Week Ahead
Tuesday is the first trading day after June monthly options expiry. Historically, that's not been a good day. Our major indices are also overbought as the daily RSIs for the S&P 500 and NASDAQ 100 are currently 73 and 74, respectively. There won't be a lot of earnings reports or economic reports out this week, outside of FedEx (FDX) and a couple housing reports.
Historically, this can be a difficult period. I realize that the 18th and 19th of June fell on Sunday and a holiday, but check out the annualized returns for the following days in June (since 1950):
- June 18th: -24.13%
- June 19th: -13.07%
- June 20th: -20.92%
- June 21st: +17.40%
- June 22nd: -27.52%
- June 23rd: -5.27%
- June 24th: -40.77%
- June 25th: -16.94%
- June 26th: -75.89%
- June 27th: -6.11%
Clearly, this is not a favorable period for U.S. equities and so this, combined with overbought conditions and remaining max pain issues, suggests we should remain with a fairly cautious outlook for now.
Let me emphasize that I am NOT bearish. I'm cautious. There's a very big difference. I'm now believing that the S&P 500 will hit all-time highs BEFORE year end, but tread lightly this week.
Happy trading!
Tom Bowley, Chief Market Strategist
EarningsBeats.com
"Better timing. Better trades."