EB Weekly Portfolio Report - Saturday, October 21, 2023

Tom Bowley - October 21, 2023

Model ETF Portfolio

Prior to the last quarter, we had beaten the benchmark S&P 500 3 times in a row and 5 out of the last 6 quarters. However, we lost ground to the S&P 500 last quarter and it was mostly due to our 10% holding in ARKK, one of Cathie Wood's aggressive ETFs. ARKK lost nearly 24% during these past 3 months, ruining what could have been our 4th consecutive quarter beating the S&P 500. Those ARK funds have really been awful performers and we learned our lesson in our Model ETF Portfolio quarter that ended on Thursday, October 19th.

Currently, our Model ETF Portfolio will sit in cash until either just before the close on the 25th (Wednesday) or at the close on the 26th or 27th. We normally invest in the new quarter's portfolio at the 25th (closing price) of the calendar month as that's when we typically see monthly bearishness end. We will be announcing the ETFs that will be in our next quarterly Model ETF Portfolio on Tuesday in our regularly scheduled Model ETF Draft webinar. We will then use the current cash to purchase those ETFs in various percentages at the close on Wednesday, Thursday, or Friday. I'll be watching intraday action each day and will announce the timing in the DMR or in a separate email. The % allocations will be announced during Tuesday's webinar. If you're interested in our Model ETF Portfolio, please stay tuned next week for the timing of these purchases.

Change To Aggressive Portfolio

A little more than one week ago, we announced that we were "selling" our CELH holding at the price of 164.35, which was the current price at the time I wrote the DMR. The short interest on CELH was building (short percentage of float moved up from 25% to 29% in a two-week period) and its price dropped 25% in just 3 weeks. Short sellers can rip a stock apart and I simply don't want to take a chance that CELH will continue to fall precipitously before our next draft in late November. For now, that portion of the portfolio will remain in cash. If I see a replacement, I'll pass it along in a future DMR and will also announce it here in the Weekly Portfolio Report.

CELH has been showing extreme volatility and, after showing a bit of short-term strength last week and moving briefly above its 20-day EMA, fell rapidly again on Friday and closed at 162.02. While the performance of CELH will no longer have an impact on the performance of our Aggressive Portfolio, I will continue to show its weekly performance below for those who choose to hold.

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, October 23: HLX

Tuesday, October 24: GOOGL, MANH

Wednesday, October 25: BA, ADP, NOW

Thursday, October 26: AMZN, MA, INTC, TXT

Friday, October 27: 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:

Historically, there have been 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. For the latest August portfolios, we made changes to this strategy, specifically, including more than our traditional 10 equal-weighted stocks. We're including more than 10 stocks in each portfolio, with several weighted at 5% instead of 10% of the portfolio.
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, August 24th, and were all entered into as of the close on Friday, August 25th 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 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 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.