Monday will mark the end of my third quarter of performance for the Model Portfolio. I've easily surpassed the benchmark S&P 500 in each quarter and this last quarter was certainly no exception. The average return of the 10 equal-weighted stocks in this portfolio was 12.90%. The S&P 500 rose just 1.02%. Here's a summary of performance, by individual stock:
Roku, Inc. (ROKU): +59.82%
Shopify, Inc. (SHOP): +31.17%
L3Harris Technologies, Inc. (LHX): +14.82%
Chipotle Mexican Grill, Inc. (CMG): +14.15%
Advanced Micro Devices, Inc. (AMD): +13.38%
MercadoLibre, Inc. (MELI): +8.70%
Global Payments, Inc. (GPN): +5.30%
MSCI, Inc. (MSCI): +0.63%
Waste Connections, Inc. (WCN): -2.09%
Gardner Denver Holdings, Inc. (GDI): -13.68%
ROKU was the monster in the Model Portfolio. Here's what it looks like currently:
The huge volume explosion to the upside in May after its quarterly results were released was the reason for my interest in ROKU initially. Recently, ROKU had another big surge on heavy volume after quarterly results were released. A pullback to the 112-120 area is definitely a possibility, but it'll be hard to keep ROKU out of my portfolios on Monday when I release my next Top 10 Stocks for each portfolio.
On May 19th, all of the 10 stocks discussed above were showing excellent relative strength after posting better-than-expected earnings and, hence, became my Top 10 stocks. The idea is to hold each of them for one entire quarter, until the next Top 10 stocks are revealed. Management teams that are executing their business plans is step 1 in identifying great companies to own. The way that Wall Street separates the winners from the losers is simply by determining which management teams can be trusted. They don't take estimates lightly. Those are management promises. Companies that exceed those estimates are clearly performing on a higher level than those that can't. Many times that will result in further accumulation by big firms for their clients. We want to own these companies and that's why the Model Portfolio was started.
Next up is the Aggressive Portfolio.
After starting my Model Portfolio in November 2018, which essentially was my "favorite 10 stocks" in my Strong Earnings ChartList (hundreds of companies that beat Wall Street consensus estimates as to both revenues and estimates and had solid technical outlooks), it performed so well over the next two quarters (rising 30.13% vs. the S&P 500's rise of 6.27%), EarningsBeats.com members requested two additional portfolios. My first answer was a more aggressive group of stocks with a ton of promise, but also with high volatility to attempt to maximize returns - the Aggressive Portfolio, which comprises a group of mostly small-cap and mid-cap stocks. My second answer was a group of more defensive, household names with solid dividend yields designed to outperform the benchmark S&P 500 during rough patches in the market, but also expected to perform well in up markets - just not as well as the Model or Aggressive Portfolios. More on the Income Portfolio later. Right now, let's summarize the performance of the 10 equal-weighted stocks in the Aggressive Portfolio over its initial quarter (I started both the Aggressive and Income Portfolios on May 19th):
Enphase Energy, Inc. (ENPH): +118.63%
Trade Desk, Inc. (TTD): +25.55%
Match Group, Inc. (MTCH): +15.94%
Teradyne, Inc. (TER): +15.36%
L3Harris Technologies (LHX): +14.82%
Veracyte, Inc. (VCYT): +5.13%
Everbridge, Inc. (EVBG): -3.15%
Kratos Defense & Security Solutions, Inc. (KTOS): -4.93%
Tandem Diabetes Care, Inc. (TNDM): -12.47%
Everi Holdings, Inc. (EVRI): -17.29%
You can see why this is the Aggressive Portfolio. There were wide disparities in how they performed. Owning just one or two of these 10 stocks would have made you very happy or a bit distraught, depending on which one(s) you owned. ENPH turned out to be the best performing stock in any of my portfolios since I started this process. To say that owning a 118% winner in 3 months helps a portfolio is a major understatement. ENPH is in the renewable energy space, which has been the top performing industry. ENPH has arguably been the best performing stock in the best performing index. This is the strategy behind using relative strength as a key component for selection of portfolio stocks. Here's the current chart of ENPH:
I think the accumulation here is quite apparent as it was with ROKU. Price action, relative strength, industry strength and excellent fundamentals combined to produce a 118% winner. I'd love to find another winner like this one. Maybe I'll have one on Monday. :-)
On to the Income Portfolio.
While overall results in this initial quarter (Income Portfolio's +6.66% vs. +1.02% on S&P 500) are not nearly as great as the Model or Aggressive Portfolios, I'd argue this is the most impressive of the three portfolios. Why? Well, first check out this chart of the Income Portfolio's performance vs. the S&P 500:
The drawdowns during S&P 500 weakness has been extremely impressive. The first big drop in the S&P 500 occurred in May as it was down roughly 4% in the first 2 weeks after the portfolio stocks were selected. The Income Portfolio fell less than half that of the S&P 500, exactly what it was designed to do. The most recent drop in the S&P 500 has been an even more impressive accomplishment for the Income Portfolio. The S&P 500 was up 5.8% in late July, then proceeded to give it all back the last 3 weeks. The Income Portfolio, however, has been extremely resilient and actually closed on Friday near its high for the period, refusing to follow the S&P 500 lower. THAT is what separates this portfolio from the others - its protection during down markets.
Here's the individual performance of these "boring" names:
Hershey Foods Corp (HSY): +20.59%
L3Harris Technologies, Inc. (LHX): +14.82%
Waste Management, Inc. (WM): +10.16%
Kimberly Clark Corp (KMB): +9.14%
Accenture Ltd (ACN): +8.35%
Tysons Food, Inc. (TSN): +6.32%
Colgate -Palmolive Co (CL): +0.43%
Walt Disney Co (DIS): +0.12%
Kansas City Southern Corp (KSU): -1.54%
Ingersoll-Rand (IR): -2.43%
Given the volatile nature of the stock market recently and all the uncertainty over the trade war, the Fed, the inverted yield curve, etc., the Income Portfolio could make sense for a lot of investors and traders. Obviously, past performance never guarantees future performance, but sticking with proven companies that pay nice dividends and are showing exceptional relative strength provides an alternative to the high-flyers.
Tomorrow is Selection Monday.
I want to invite anyone who is a non-member at EarningsBeats.com to join me for a webinar that could change the way you view the stock market forever. Stick with the leaders. Let Wall Street guide you to the winners and help you avoid the huge losers that drain portfolios. The webinar begins at 4:30pm and I'll be unveiling what I believe are the 30 best stocks to fill out my Model, Aggressive and Income Portfolios. You do not want to miss this and while I'd have every right to charge thousands of dollars given the performance-to-date of these 3 portfolios, I want you to be there.
The cost? $7. That's it. It's a special trial offer that will get you the following:
- 30 days of full membership
- a seat at Monday's Top 30 Stocks webinar
- a link to all 311 annotated stocks on my Strong Earnings ChartList that have beaten Wall Street consensus estimates as to both revenues and earnings per share (EPS)
- trade alerts that provide you entry price, target price and stop loss
- a brief daily market update
- access to all webinars during your membership
- access to our webinar archives that include prior Top 30 Stocks webinars
I don't know how I can provide you a better offer. CLICK HERE to sign up and I'll see you at Monday's webinar!!!
Happy trading!
Tom
