Stock Market Extends Gains and One Transaction in the Model Shadow Stock Portfolio
The market continued to rally during May. It has been well-documented that high-yielding stocks have performed well during the recent market rally. However, during the last few days of May, investors began to pull back on high-yielding companies as valuations on these stocks rose. In addition, investors are keeping a close watch on interest rates, speculating on when the Federal Reserve may raise rates. During May, smaller-cap stocks came back in favor, after larger-cap stocks performed better in April.
During the month, the large-cap S&P 500 index and the S&P MidCap 400 index both gained 2.3%, while the S&P SmallCap 600 index gained 4.4%.
For May, the Model Shadow Stock Portfolio gained 6.5%, outperforming the Vanguard Small Cap Index fund (NAESX), which gained 3.6%, and bettering the DFA US Micro Cap Index fund (DFSCX), which was up 5.2%. Year-to-date, the Model Shadow Stock Portfolio has gained 32.8%, beating the Vanguard Small Cap Index fund, which has gained 17.1%, and the DFA US Micro Cap Index fund, which is up 16.9%. The Model Shadow Stock Portfolio has a compound annual return of 17.7% from its inception in 1993, while the Vanguard Total Stock Market Index fund (VTSMX) has gained 8.8% annually over the same period.
The Model Fund Portfolio was up 2.1% for May and the newly implemented Conservative Portfolio (75% Model Fund Portfolio and 25% iShares Barclays 1-3 Year Treasury Bond ETF) was up 1.5%. This compares to a 2.3% gain for the Vanguard Total Stock Market Index fund (VTSMX). Year-to-date, the Model Fund Portfolio has now gained 13.6% and the Conservative Portfolio is up 10.1%, compared to 15.5% for the Vanguard Total Stock Market Index fund. The Model Fund Portfolio has a compound annual return of 9.0% from its inception in June of 2003, while the Vanguard Total Stock Market Index fund has gained 8.2% annually over the same time period.
NEW THIS MONTH
The month represents the quarterly rebalancing of the Model Shadow Stock Portfolio and there is one new buy and one new sell. Sterling Construction (STRL) was sold because it violated earnings probation. Using the proceeds, International Shipholding Corp. (ISH) was purchased for the portfolio.