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Large Cap Gains Leave Small Caps Lagging

The S&P index climbed 2.5% in November. Energy prices and strengthening economic data in the US continued to be the themes for the market. With gasoline $3 a gallon (and under) now a reality for consumers, analysts expect that that money will return to the market in the form of consumer spending This would be a welcome change, given the rather poor Black Friday retail sales numbers that came out. Additionally, a weakening China also cast a pall over the market as its economy struggled with a bursting housing bubble and slowing demand across the globe for everything except iPhones. The Model Fund Portfolio climbed 1.3% during November, while the Model Shadow Stock Portfolio, which specifically invests in small-company stocks, fell 2.4%.

The Model Shadow Stock Portfolio’s 2.4% decline for the month trailed its comparison benchmarks: The Vanguard Small Cap Index (NAESX) was up 1.0% and the DFA US Micro Cap Index fund (DFSCX) was down 0.7%. Year-to-date, the Model Shadow Stock Portfolio has declined 9.6%, trailing the Vanguard Small Cap Index fund (up 6.0%) and the DFA US Micro Cap Index fund (down 0.4%). The Model Shadow Stock Portfolio has a compound annual return of 16.8% since its inception in 1993, while the Vanguard Total Stock Market Index fund (VTSMX) has gained 9.4% annually over the same period.

The Model Fund Portfolio’s 1.3% gain in November compares to a gain of 2.4% for the Vanguard Total Stock Market Index fund. Year-to-date, the Model Fund Portfolio is up 9.7%, while the Vanguard Total Stock Market Index fund is up 12.4%. The Model Fund Portfolio has a compound annual return of 9.4% since inception in June of 2003 slightly trailing the performance of the Vanguard Total Stock Market Index fund over the same time period, which returned only 9.6%.

NEW THIS MONTH

There were two transactions in the Model Shadow Stock Portfolio. Global Power Equipment Group Inc. (GLPW) and the L.S. Starrett Company (SCX) were added to the portfolio. No stocks met the portfolio’s sell rules, so there were no portfolio deletions this month.

As a reminder, after the close of the market on October 31, 2014, Model Shadow Stock Portfolio holding Kimball International (KBAL) spun off its electronics division, resulting in shares of Kimball Electronics that trade under the symbol KE in the portfolio. For the present time, these new KE shares will remain in the portfolio.

There were no changes to the Model Fund Portfolio this month.