Broad Market Rally Continued During April

Stocks continued their upward march during April, with the Vanguard 500 Index fund (VFINX) posting a 0.4% gain during the month. The S&P 500 index itself finished the month at 2065.30, just 3% below its all-time high set on May 21, 2015.

There was widespread participation in the market upswing that started in late February. Mid- and small-cap stocks performed even better during the month. The S&P MidCap 400 index gained 1.2% during April, while the S&P SmallCap 600 index returned 1.2%. While the market performance during 2015 was characterized by narrow upward price movement of a smaller group of large-cap stocks, the breadth of the rally this year has been much healthier. The equal-weighted Guggenheim S&P 500 ETF (RSP) was up 1.2% during April and is up 4.2% year to date, while the market-cap-weighted SPDR S&P 500 ETF (SPY) was up 0.4% during April and is now up 1.7% for the year. During 2015, the SPDR S&P 500 fund posted a gain of 1.3%, while the Guggenheim S&P 500 fund had a loss of 2.6%.

Value-oriented stocks performed better than growth-oriented stocks during April. The S&P 500 Growth index was down 1.3% during April, while the S&P 500 Value index gained 2.1%. The pattern was similar across all market-cap segments. The S&P SmallCap 600 Growth Index gained 0.3% for the month, while the S&P SmallCap 600 Value Index was up 2.1% during April.

A quick look at the sectors within the S&P 500 reveals that the top-performing sectors in April were energy (up 8.7%), materials (up 5.0%) and financials (up 3.4%.). Only four sectors were up during 2015: consumer discretionary (up 8.4%), health care (up 5.2%), information technology (up 4.3%) and consumer staples (up 3.6%). In contrast, the weakest sectors were energy (down 23.6%), materials (down 10.4%), utilities (down 8.4%), industrials (down 4.7%), financials (down 3.5%) and telecom services (down 1.7%). The two worst-performing sectors in April were information technology (down 5.4%) and utilities (down 2.4%.)

In the Model Shadow Stock Portfolio, 17 out of 30 stocks were up for the month. Salem Media Group (SALM) posted a profit of 36.0% during the month. Salem Media is a multi-media company specializing in Christian and conservative content with media properties consisting of radio broadcasting, digital media, and book, magazine and newsletter publishing.

Overall, the Model Shadow Stock Portfolio gained 2.0% during April and is now up 3.9% year to date, while the Vanguard Small Cap Index fund (NAESX) was up 1.7% during the month and is up 2.7% for the year. The DFA U.S. Micro Cap Index fund (DFSCX) gained 1.1% during April and is up 2.0% for the year. Since its inception in 1993, the Model Shadow Stock Portfolio has a compound annual average return of 15.4%, while the Vanguard 500 Index fund (VFINX) has gained 8.9% over the same period.

The Model Fund Portfolio’s 1.5% gain in April compares to a 0.4% increase for the Vanguard S&P 500 Index fund. The Model Fund Portfolio has gained 2.9% year to date, while the S&P 500 index fund is up 1.7%. Since its inception in June of 2003, the Model Fund Portfolio has a compound annual average return of 8.1%, matching the 8.1% return of Vanguard 500 Index fund over the same period.

May Portfolio Updates

There are no changes to the Model Shadow Stock Portfolio this month.

Twenty-eight stocks passed the screen at the end of April. Five stocks in the actual portfolio qualified for purchase as of the end of April: CSS Industries (CSS), Key Tronic Corp (KTCC), L S Starrett Co. (SCX), Salem Media Group (SALM) and Willis Lease Finance Corp. (WLFC). Qualified stocks are companies held within the Model Shadow Stock Portfolio that currently meet the initial purchase rules. (They are designated as “qualified” in the notes column of the Model Shadow Stock Portfolio table.)

The next quarterly review of the AAII Shadow Stock portfolio will take place in June. Any changes to the portfolio will be highlighted in the June AAII Model Portfolio Update and in Dr. Cloonan’s quarterly model portfolio commentary in the July issue of the AAII Journal.

Click here to see the current purchase and sell rules. The size and value rules are subject to revision depending on prevailing market conditions.

Following the April quarterly review, no changes were made to the AAII Model Fund Portfolio. The next quarterly review of the Model Fund Portfolio will take place in July.