Over the past five months, since that March low, we've enjoyed many stocks' relentless pursuit to the upside. I know it's hard, however, to keep chasing those stocks as their prices move into what seems the stratosphere. So I set out to find stocks that are just beginning to show excellent relative strength in strong industry groups. Remember, it's always important to find leading stocks in leading industry groups if you want to beat the benchmark S&P 500. The proof is in the performance of our Model portfolio, which is +118.26% since its inception on November 19, 2018. By comparison, the S&P 500 is +25.35% over the same period.
When I "draft" the 10 equal-weighted stocks that I include in our Model portfolio, I generally do so with the primary focus being relative strength. Every stock in our Model Portfolio MUST also be on our Strong Earnings ChartList (SECL). I review thousands of earnings reports each quarter and companies that beat Wall Street consensus estimates as to both revenues and earnings are added to our SECL if:
- they're liquid (trade at least 200,000 shares per day on average)
- they look solid technically, trending higher and showing relative strength
I still really like the AAPLs, AMZNs, and TSLAs of the stock world, but every quarter I see emerging leadership and I want to focus on 3 of these stocks - one or more of which might find their way into our newest Model portfolio, which will be released on Wednesday, August 19th, beginning at 5:30pm ET. Check these three out:
Delivery Services - United Parcel Services (UPS)
I don't believe there's a hotter industry right now than the Dow Jones U.S. Delivery Services Index ($DJUSAF). And I'm quite honestly not sure which one is better, United Parcel Services (UPS) or FedEx Corp (FDX). Over the past couple years, though, UPS has been in an uptrend vs. FDX, which was the differentiating factor here for me. The massive volume and gap higher with its latest quarterly report suggests massive institutional accumulation:
Internet - Pinterest (PINS)
The Dow Jones U.S. Internet Index ($DJUSNS) has remained a leading industry group since late-2018. It's a group that I want to continue to look at for leadership. PINS has begun providing that leadership and I expect it to continue. Over 100 million shares changed hands in late-July after PINS delivered blowout revenue and earnings numbers. Now look at the strength:
Specialty Retail - Autonation (AN)
Like both UPS and PINS, the largest volume of the year accompanied AN after it posted blowout quarterly results in July. The Dow Jones U.S. Specialty Retailers Index ($DJUSRS) has been soaring in 2020 and AN is the latest to take on a leadership role. AN has now broken its recent relative downtrend and has jumped to a six-month relative high vs. a strong specialty retail group:
These are the types of stocks I look for. Creating and organizing ChartLists is the first step to planning and executing great trades. I actually ran a scan against our Strong Earnings ChartList that only considered stocks that had made significant jumps in SCTR scores, so it ignored AAPL, AMZN, TSLA and others like those, as they've been leaders for a long time. UPS, PINS, and AN are just beginning to show leadership qualities and higher SCTR scores.
Speaking of momentum, EarningsBeats.com is enjoying tremendous momentum and growth as well. If you'd like to see what we do, we have two upcoming events that I think you'd really enjoy:
"The Research Engine at EarningsBeats.com" (free event)
- Date: Saturday, August 15, 2020
- Time: 2:00pm ET
- Cost: FREE
Details: I'm planning to walk everyone through our service at EarningsBeats.com. I'll be discussing our 4 portfolios, 7 key ChartLists, various scanning strategies (we provide the scan syntax to use at StockCharts.com), and our member-only webinars/events. We will be sending out room instructions tomorrow to our entire EarningsBeats.com community. If you're interested, you can join us for this event in one of two ways.
(1) Subscribe to our free EB Digest newsletter (published 3x per week - Mondays, Wednesdays and Fridays). You can sign up with name and email address HERE (no credit card required and you can unsubscribe at any time). We will send out room instructions to our entire EB Digest subscribership on Saturday before the event.
(2) Go to our website at www.earningsbeats.com at the time of the event and we'll have instructions on our home page on how to join, along with a link to the webinar room.
"Top 10 Stocks - The Draft" (members-only event)
- Date: Wednesday, August 19, 2020
- Time: 5:30pm ET
- Cost: Must be at least a no-cost trial member
- Details: CLICK HERE
I hope to see you at these events!
Happy trading!
Tom
