EB Weekly Portfolio Report - Sunday, August 1, 2021

Tom Bowley - August 01, 2021

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, August 2: MOS

Tuesday, August 3: LHX, IT, SEE, ARNC, IGT, AVID

Wednesday, August 4: CVS, EOG, ATRC

Thursday, August 5: EXPE, K, DBX, ATH, YETI

Friday, August 6: None

PLEASE NOTE: The above companies were provided after scanning the Zacks Earnings Calendar. My research is limited to what Zacks provides and I also can make a mistake from time to time, so please check for earnings dates for all companies that you own. 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 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 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
They were all entered into as of the close on Friday, May 19th; members may choose to try to time better entries, but EB.com "purchased" as of May 19th's closing price
Primary objective is to outperform the benchmark S&P 500

Here are several considerations for EB members:

I would expect the Strong AD and Aggressive portfolios to be the riskiest, followed by the Model portfolio, and then the Income portfolio
The Strong AD portfolio will be selected from a combination of rising accumulation/distribution lines and SCTRs above 70 at the time of selection. It is the only portfolio that does NOT require a revenue and EPS beat in its most recent quarterly earnings report
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 three; 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 last quarter 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
You should own or trade 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:

A large number of key high-growth stocks reported their quarterly results last week. Mostly, the numbers were exceptionally strong, yet the S&P 500 could not add to its recent gains. It's the "sell on news" mentality that's making further gains a struggle. Apple (AAPL), Microsoft (MSFT), Tesla (TSLA), Alphabet (GOOGL), Facebook (FB), PayPal (PYPL), and Amazon.com (AMZN) all reported their results. If you'd like to see the primary reason that our major indices couldn't move higher last week, look at the weekly performance of these 7 juggernauts after earnings were released:

TSLA's strength was more than offset by significant weakness in both AMZN and PYPL. AAPL and MSFT, with over $4.5 trillion in market cap between them, both fell for the week. That also helps to explain why the NASDAQ lost over 1% last week and trailed the S&P 500's 0.37% decline.

Model Portfolio:

The Model Portfolio lost 1.80%, losing ground to 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:

GNRC reported solid results last week, but a negative divergence likely was the culprit for a harsh selloff:

GNRC remains an excellent relative performer, but those two pink arrows mark key areas to watch - the 50 day SMA and the PPO centerline.

Aggressive Portfolio:

The Aggressive Portfolio climbed 0.42%, 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:

This portfolio had a fairly solid week, with one exception. SBH reported results that exceeded expectations and saw plenty of upgrades from the investment community, but that mattered little as sellers had firm control:

Income Portfolio:

The Income Portfolio fell 1.15%, once again underperforming the benchmark 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:

UPS beat both top and bottom line estimates when it reported last week, but lower average daily shipping volume spooked traders who sent the shares down to test key gap support:

I'd like to see UPS hold onto this gap support level. Intraday, it appeared to be breaking down, but it was able to recover by day's end. One bullish signal is the AD line, which has moved to fresh highs despite the recent selling. It's mostly because buyers have emerged at this 190 level.

Strong AD Portfolio:

The Strong AD Portfolio gained 2.69%, easily outdistancing the S&P 500 and has pulled ahead of the benchmark for the current quarter. Here's the updated inception-to-date chart of the portfolio:

Here are how the Strong AD portfolio component stocks performed last week:

Last week's best performer, ATRC, managed to break out and it's in a strengthening industry, medical equipment ($DJUSAM):

The upcoming week will be a big one for this portfolio, however, as 5 of its 10 components will report quarterly results.

Summary

As we move into August, we need to remind ourselves to lower our expectations for the stock market. Since breaking out above the 2000 and 2007 market tops in April 2013, we've had 8 years of secular bull market action. But strength from August 1st through September 27th has been limited. Gains (losses) for this period have been as follows during each year of the current secular bull market:

2013: +0.36%
2014: +2.70%
2015: -8.20%
2016: -0.63%
2017: +1.49%
2018: +3.47%
2019: -0.62%
2020: +0.85%

The S&P 500 has climbed during this upcoming period 5 of the last 8 years, but the best year produced just a 3.47% gain, while the worst year saw an 8.20% decline. No matter how you invest or trade, you should at least be aware of the elevated risk during this upcoming seasonal period.

Model ETF Portfolio

Our Model ETF Portfolio fell 0.36% last week, nearly matching S&P 500's 0.37% decline.

Here's the updated inception-to-date chart of the Model ETF Portfolio:

Here are how the Model ETF Portfolio component ETFs performed last week:

Happy trading!

Tom Bowley, Chief Market Strategist

EarningsBeats.com

"Better timing. Better trades."