AAII Model Portfolios continue to climb in February

Stocks continued to do well in February, as the market pushed to pre-recession levels. Though I am enjoying the market rally, I cannot help but wonder how long stocks can keep up the momentum. Investors seem to have been shrugging off sequestration, or automatic spending cuts, and have continued to push money into the stock market. That being said, it is likely not time to worry just yet. The S&P 500 is currently trading with a median forward price-earnings ratio of 15.2, which is fair.

During the month, small-, medium- and large-cap stocks in the S&P 1500 all performed similarly. The large-cap S&P 500 index gained 1.1% during the month of February, while the S&P 400 MidCap index gained 0.8% and the S&P 600 SmallCap index gained 1.3%.

For February, the Model Shadow Stock Portfolio gained 2.2%, outperforming the Vanguard Small Cap Index fund (NAESX), which gained 1.3%, and bettering the DFA US Micro Cap Index fund (DFSCX), which was up 1.1% during February. Year-to-date, the Model Shadow Stock Portfolio has gained 10.6%, beating the Vanguard Small Cap Index fund, which gained 7.8%, and the DFA US Micro Cap Index fund, which is up 6.8%. The Model Shadow Stock Portfolio has a compound annual return of 16.9% from its inception in 1993, while the Vanguard Total Stock Market Index fund (VTSMX) has gained 8.5% annually over the same period.

The Model Fund Portfolio was up 1.0% for February. This compares to a 1.3% gain for the Vanguard Total Stock Market Index fund (VTSMX). Year-to-date, the Model Fund Portfolio has now gained 6.3% compared to 6.9% for the Vanguard Total Stock Market Index Fund. The Model Fund Portfolio has a compound annual return of 8.4% from its inception in June of 2003, while the Vanguard Total Stock Market Index fund has gained 7.5% annually over the same time period.

NEW THIS MONTH

There are several Model Shadow Stock Portfolio transactions this month. Capital Senior Living (CSU) and Standex Int’l Corp (SXI) were sold because their price-to-book ratio rose above 2.40 and they are no longer value stocks by our standards. With the proceeds, The Model Shadow Stock Portfolio added Alpha & Omega Semiconductor (AOSL), Salem Communications Corp. (SALM) and TravelCenters of America LLC (TA).