Adjusting to Reality When Managing a Small-Cap Value Portfolio

    by James B. Cloonan

    Figure 1.Shadow Stock PortfolioPerformancevsBenchmarks

    Our quarterly update of the Individual InvestorÂ’s Shadow Stock Portfolio once again provides positive results, as you can see by looking at Figure 1.

    Year-to-date (as of May 31), the Individual InvestorÂ’s Shadow Stock Portfolio is up 14.0%, while the S&P 500 (as represented by VFINX) is up 1.4%. Table 1 shows the current holdings in the portfolio, along with information on their current status. You can see from the table that most of the stocks that originally qualified do not currently qualify for inclusion. The reason is that they have moved up in price, which impacts the price-to-book ratios and price-to-sales ratios. They are still value stocks by most standards, but our initial selection requirements look for extremely undervalued stocks.

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    → James B. Cloonan