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- The Model Shadow Stock Portfolio’s one-year return more than doubles the gains of the broad market and significantly exceeds the small-cap benchmark
- The quarterly review process involves examining the size and value criteria used for making changes
- New stock deletions and additions are based on valuation and market-cap limits, negative earnings, and one acquisition
After the quarterly review of the Model Shadow Stock Portfolio at the beginning of June, 10 changes were made.
Market sentiment improved throughout May as concerns about inflation and geopolitical tensions eased. The Model Shadow Stock Portfolio gained 5.6% in May, compared to 5.3% for Vanguard 500 Index fund 
(VFINX) and 3.2% for Vanguard Small Cap Index fund (NAESX). The portfolio’s one-year return reached 71.9%, more than doubling the gains of the broad market and significantly exceeding the small-cap benchmark. Figure 1 shows performance over a variety of time periods.
Quarterly Portfolio Review and Deletions
The Model Shadow Stock Portfolio is reviewed quarterly to determine portfolio deletions and additions. AAII’s stock analysis and screening service Stock Investor Pro, with data as of June 2, 2026, was used to determine the value and size break points for the quarterly review.
The primary Model Shadow Stock Portfolio selection criteria target the intersection of the smallest 10% of domestic stocks as measured by market capitalization, along with the “cheapest” 10% of domestic stocks as measured by the price-to-book-value (P/B) ratio.
The current portfolio holdings are presented in Table 1, and a list of the changes is shown in Table 2.
Approaching Size Limit: Stocks are sold if their market capitalization goes above three times the initial maximum criterion and there is a stock to replace it. The current market-cap maximum for initial screening is $400 million. Stocks are marked “approaching size limit” if their current market cap exceeds 2½ times the initial criterion, or $1.0 billion.
Approaching Value Limit: Stocks are sold once their price-to-book-value (P/B) ratio goes above three times the initial criterion and there is a stock to replace it. The current initial price-to-book ceiling is 1.00. Stocks are marked “approaching value limit” if their current price-to-book ratio exceeds 2½ times the initial criterion, or 2.50.
Earnings Probation: If the last 12 months’ earnings are negative, the stock is put on probation; if a subsequent quarter has negative earnings prior to 12-month earnings becoming positive, the stock is sold. When available, adjusted (non-GAAP) earnings are used to put stocks on probation or remove them. Otherwise, earnings from continuing operations are used. The date is the calendar quarter for which the company first reported negative trailing 12-month earnings.
Qualifies As Of: Stock still qualified as an addition when the screen was run with current data. Stocks that don’t currently qualify as an addition are held until they meet one of the deletion rules.
TTM Adjusted Earnings Positive: Trailing four-quarter GAAP earnings are negative, resulting in no meaningful figure for the price-earnings (P/E) ratio. However, adjusted earnings for the period are positive.
Value
The price-to-book cutoff has increased slightly from 0.96 at the end of February to 0.97. The cutoff was 0.79 one year ago. The current initial qualifying maximum price-to-book ratio is 1.00 and we left it unchanged. Stocks in the model portfolio are removed for valuation if they exceed three times the initial maximum price-to-book ratio at the time of a quarterly portfolio review.
Portfolio Deletion: Vishay Precision Group Inc.
Vishay Precision Group (VPG) had the highest price-to-book ratio in the model portfolio at 4.67, exceeding the maximum threshold. Its stock price has surged over the last year, as investors responded to strong earnings, accelerating order growth, and growing demand for its precision sensor technologies used in artificial intelligence (AI) infrastructure, industrial automation and defense applications. Vishay Precision Group is being removed from the portfolio due to its valuation and market cap. The company was added to the portfolio on June 4, 2015, at a price of $13.43 per share. It was deleted on June 8, 2026, at $119.32 per share, for a price gain of 788.5%.
Size
We examined the market-cap levels of domestic companies listed on the New York Stock Exchange (NYSE) to determine the size cutoff for the lowest decile when adding stocks to the model portfolio. The lowest-decile market-cap level increased from $400 million at the end of February to $420 million using data in Stock Investor Pro as of June 2, 2026. We maintained the maximum initial qualifying market-cap value at $400 million. Holdings are removed if their market cap goes above three times the initial criterion at the time of the quarterly review.
Vishay Precision Group’s market cap of $1.563 billion exceeded the $1.2 billion market-cap maximum at the time of the review.
Earnings
If a company has trailing 12-month earnings from continuing operations that are negative, the stock is placed on probation; if a subsequent quarter has negative earnings prior to trailing 12-month earnings becoming positive, the stock is deleted. When available, normalized (non-GAAP) earnings are used to put stocks on probation or remove them.
Three holdings were on earnings probation at the start of the quarterly reporting season, and all three reported losses during the quarter.
Portfolio Deletion: DMC Global Inc.
DMC Global (BOOM) is a diversified industrial manufacturer serving construction, energy and process industries through architectural building products, oilfield perforating systems and explosion-welded specialty metals, with results heavily influenced by commercial construction activity and energy sector spending.
DMC Global reported a first-quarter 2026 normalized loss of $0.28 per share on April 30, 2026, while its trailing 12-month adjusted earnings were still negative. DMC Global was added to the portfolio on June 11, 2024, at a price of $12.64 per share. It was deleted on June 8, 2026, at $6.845 per share, for a loss of 45.8%.
Portfolio Deletion: Lakeland Industries Inc.
Lakeland Industries (LAKE) manufactures protective apparel and safety equipment for industrial workers and first responders, providing firefighting gear, chemical protection suits and disposable protective clothing to customers across energy, manufacturing, healthcare and government markets worldwide.
On April 16, 2026, Lakeland Industries reported an adjusted loss of $0.156 per share for its fiscal fourth-quarter 2026 ended January 31, while its trailing 12-month adjusted earnings were still negative. Lakeland Industries was added to the portfolio on June 14, 2023, at a price of $12.88 per share. It was deleted on June 8, 2026, at $9.35 per share, for a loss of 27.4%.
Portfolio Deletion: Saga Communications Inc.
Saga Communications (SGA) is a broadcast media company that owns and operates radio stations across the U.S., generating revenue from local advertising, digital marketing services, events and related media activities.
On May 7, 2026, Saga Communications reported a first-quarter 2026 normalized loss of $0.324 per share, while its trailing 12-month adjusted earnings were still negative. Saga Communications was added to the portfolio on December 13, 2023, at a price of $23.70 per share. It was deleted on June 8, 2026, at $9.014 per share, for a loss of 62.0%.
Acquisition
Portfolio Deletion: Fonar Corp.
Fonar (FONR) develops, manufactures and services MRI scanners—best known for its proprietary Upright MRI technology—while also generating revenue through the management and operation of diagnostic imaging centers and related healthcare services.
On December 29, 2025, Fonar announced that it had entered into a definitive agreement to be acquired by a management-led investor group for $19.00 per share in cash, representing a 31.5% premium to its pre-announcement share price. The transaction received the necessary approvals and was completed on June 4, 2026, ending Fonar’s tenure as a publicly traded company.
Fonar was added to portfolio on March 14, 2022, at a price of $17.41 per share. It was tendered on June 4, 2026, at $19.00 per share, for a gain of 9.1%.
Quarterly Portfolio Additions
As of June 5, 18 stocks met the initial selection criteria for the Model Shadow Stock Portfolio. AAII members can see and research which companies are currently meeting the initial selection criteria in the Shadow Stock Ideas table on AAII.com. The list of new Shadow Stock Ideas is updated daily—Tuesday through Saturday.
Three of the 18 qualifying stocks were already in the Model Shadow Stock Portfolio at the time of the review. The remaining 15 stocks were examined to ensure adequate liquidity, timely financial filings, and appropriate industry and foreign considerations. The Shadow Stock Portfolio Rules on AAII.com provide guidance on factors to consider when selecting stocks for your portfolio.
With the proceeds from the deletions, as well as the cash held in the portfolio, the Model Shadow Stock Portfolio was initially targeting six companies for addition at roughly the average position size for the existing holdings in the tracking portfolio. However, strong market and company price actions lifted the price-to-book values of some candidates. As such, only five stocks are being added at this time and the portfolio will hold some cash for now.
Portfolio Addition: Columbus McKinnon Corp.
Columbus McKinnon (CMCO) manufactures motion control and material handling equipment, including hoists, cranes, conveyors and lifting systems, serving industrial, automation, infrastructure and warehouse markets worldwide.
Columbus McKinnon has a current book value of $23.18 per share. If you wish to stay within the 1.00 price-to-book maximum, you should pay no more than $23.18 per share. However, if the stock price has moved up, you can still purchase the stock unless the price-to-book ratio goes above 1.10, which equates to a price of $25.50 per share.
Portfolio Addition: Hudson Technologies Inc.
Hudson Technologies (HDSN) provides refrigerant products, reclamation and management services, and energy-efficiency solutions that help commercial, industrial and government customers maintain and optimize refrigeration and air conditioning systems.
Hudson Technologies has a current book value of $5.65 per share. If you wish to stay within the 1.00 price-to-book maximum, you should pay no more than $5.65 per share. However, if the stock price has moved up, you can still purchase the stock unless the price-to-book ratio goes above 1.10, which equates to a price of $6.22 per share.
Portfolio Addition: Kolibri Global Energy Inc.
Kolibri Global (KGEI) is an independent oil and gas producer focused on developing and operating its Caney Shale acreage in Oklahoma’s Ardmore Basin, where it produces oil, natural gas and natural gas liquids.
Kolibri Global has a current book value of $5.90 per share. If you wish to stay within the 1.00 price-to-book maximum, you should pay no more than $5.90 per share. However, if the stock price has moved up, you can still purchase the stock unless the price-to-book ratio goes above 1.10, which equates to a price of $6.49 per share.
Portfolio Addition: Mastech Digital Inc.
Mastech Digital (MHH) provides information technology (IT) staffing, data analytics and digital transformation services, helping organizations implement cloud, data management, AI and technology modernization initiatives across a range of industries.
Mastech Digital has a current book value of $7.59 per share. If you wish to stay within the 1.00 price-to-book maximum, you should pay no more than $7.59 per share. However, if the stock price has moved up, you can still purchase the stock unless the price-to-book ratio goes above 1.10, which equates to a price of $8.35 per share.
Portfolio Addition: USANA Health Sciences Inc.
USANA Health Sciences (USNA) develops and sells nutritional supplements, meal replacement products and skincare solutions through direct-to-consumer, subscription and direct-selling channels across global markets.
USANA Health Sciences has a current book value of $29.45 per share. If you wish to stay within the 1.00 price-to-book maximum, you should pay no more than $29.45 per share. However, if the stock price has moved up after being added to the portfolio, you can still purchase the stock unless the price-to-book ratio goes above 1.10, which equates to a price of $32.40 per share.
Next Portfolio Review
The next quarterly review will take place at the beginning of September. Any changes to the portfolio are reported at the time they are made in our Model Shadow Stock Portfolio Update emails. Sign up for this email so you don’t miss it!
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