Our quarterly update of the Model Shadow Stock Portfolio shows a slight gain for the quarter and a year-to-date return of 14.3% as compared to the S&P; 500’s 0.4% (as represented by the Vanguard S&P; 500 Index fund, VFINX).
The ongoing results can be seen in Figure 1. Table 1 shows the changes to the portfolio during the quarter.
| Table 1. Shadow Stock Portfolio Third-Quarter 2004 Transactions |
| Company (Ticker) |
Reason |
|
Tender |
|
Galyan’s Trading Company (GLYN) |
acquired by Dick’s
Sporting Goods
|
|
Sell |
|
Webco Industries Inc. (WEB) |
in process of delisting and
deregistering
negative earnings
|
|
CPAC Inc. (CPAK)
|
|
|
Buy |
|
Dura Automotive Systems Inc. (DRRA) |
|
|
Action Performance Companies Inc. (ATN) |
|
|
Rex Store Corp. (RSC) |
|
|
ePlus Inc. (PLUS) |
|
|
TESSCO Technologies, Inc. (TESS)
|
purchased additional shares
with excess cash
|
|
Quarterly Changes
As we have indicated previously, we only make additions and deletions quarterly, during the first three weeks of February, May, August and November.
Originally, we set up this quarterly process to show that an individual could manage a portfolio without committing a great deal of time or following holdings day by day.
Figure 1.
Shadow Stock Portfolio Performance
vs. Benchmarks
(through 8/31/04)
|
|
CLICK ON IMAGE TO
SEE FULL SIZE.
|
|
Over the years, it appears that it actually is better not to react too quickly, and our practice of not taking action until our quarterly period has helped us more than it has hurt us.
Stock Weightings
Several members have asked about the actual weighting of each stock in the Shadow Stock Portfolio so they can see how the rate of return is calculated. These are shown in Table 2.
Since we do not rebalance the portfolio on a regular basis, over time the stocks that have gone up the most have higher weights. Currently, the weights run from 5.44% to 1.45% of the portfolio with an average holding of 2.9%.
Occasionally, a holding is smaller because, before we could purchase a full position, the price ran up to where the stock no longer qualified under the price-relative-to-book-value criteria.
| TABLE 2. Current Stock Weightings in Shadow Stock Portfolio |
| Company (Ticker) |
Percentage of
Portfolio Value |
|
Company (Ticker) |
Percentage of
Portfolio Value |
|
Action Performance Cos. (ATN) |
3.07% |
|
Lazare Kaplan Intern’l (LKI) |
2.43% |
|
AirNet Systems (ANS) |
2.06 |
|
Marsh Supermarkets (MARSA) |
1.63 |
|
Bon-Ton Stores (BONT) |
3.01 |
|
McRae Industries (MRI.A) |
2.73 |
|
Books-A-Million (BAMM) |
3.77 |
|
Metals USA, Inc. (MUSA) |
5.38 |
|
Cavco Industries (CVCO) |
4.17 |
|
Northwest Pipe Co. (NWPX) |
2.74 |
|
Cronos Group (CRNS) |
4.12 |
|
Pomeroy IT Solutions (PMRY) |
1.93 |
|
Duckwall-ALCO Stores (DUCK) |
2.75 |
|
Quaker Fabric Corp. (QFAB) |
2.23 |
|
Dura Automotive Sys (DRRA) |
2.65 |
|
Rex Stores Corp. (RSC) |
2.76 |
|
ePlus inc. (PLUS) |
3.27 |
|
Sands Regent (SNDS) |
4.10 |
|
Espey Mfg & Electron (ESP) |
2.71 |
|
Scheid Vineyards (SVIN) |
2.54 |
|
Gehl Company (GEHL) |
3.43 |
|
Stephan Co. (TSC) |
3.26 |
|
Gottschalks Inc. (GOT) |
2.00 |
|
T-3 Energy Services (TTES) |
2.10 |
|
Haggar Corp. (HGGR) |
2.72 |
|
TESSCO Technologies (TESS) |
1.45 |
|
Hardinge Inc. (HDNG) |
2.84 |
|
U.S. Lime & Minerals (USLM) |
4.12 |
|
Hub Group, Inc. (HUBG) |
5.44 |
|
Willis Lease Finance (WLFC) |
2.97 |
|
IntegraMed America (INMD) |
2.18 |
|
Zapata Corp. (ZAP) |
1.61 |
|
International Shipholding (ISH) |
2.80 |
|
Portfolio Cash Position |
0.04 |
|
Ladish Co., Inc. (LDSH) |
2.98 |
|
|
|
| Data as of August 6, 2004. |
|
We believe you should weight all stocks equally when you initially create your portfolio. We also feel there is no need to rebalance, because the regular sell rules will keep a reasonable balance, and because we feel that there is a tendency for stocks that are going up to keep going up, at least in the short term.
Table 3 shows the current holdings in the portfolio, along with information on their current status.
Check for News
If you are using Stock Investor Pro or the screening that is provided monthly on our Web site, please note that in both cases screens are run based on SEC-filed data. However, when you are doing this on your own, in many cases preliminary figures for a later period may be available, or news about buyouts or problems may have just been released. Before adding a stock to your portfolio, be sure to check the Yahoo! Finance Web site or your broker’s research for the most recent news.
| TABLE 3. The Model Shadow Stock Portfolio |
|
Company (Ticker) |
Current Price
($) |
52-Week |
Mkt Cap
($ mil) |
P/E Ratio
(x) |
P/B Ratio
(x) |
Div Yield
(%) |
Notes |
High
($)
|
Low
($)
|
|
Action Performance Co. (ATN)* |
10.87 |
27.71 |
9.74 |
199.6 |
120.8 |
0.76 |
1.8 |
currently qualifies |
|
AirNet Systems, Inc. (ANS) |
4.05 |
6.20 |
3.23 |
40.8 |
20.3 |
0.48 |
0.0 |
currently qualifies |
|
Bon-Ton Stores, Inc. (BONT) |
13.35 |
17.95 |
6.76 |
214.0 |
13.0 |
0.90 |
0.7 |
|
|
Books-A-Million, Inc. (BAMM) |
7.03 |
8.19 |
3.37 |
116.2 |
13.5 |
0.88 |
1.7 |
|
|
Cavco Industries, Inc. (CVCO) |
39.49 |
41.20 |
19.00 |
124.2 |
20.0 |
1.25 |
0.0 |
|
|
Cronos Group (CRNS) |
7.82 |
9.65 |
3.46 |
56.8 |
10.0 |
0.90 |
2.0 |
|
|
Duckwall-ALCO Stores (DUCK) |
17.09 |
18.65 |
13.52 |
74.9 |
12.0 |
0.67 |
0.0 |
currently qualifies |
|
Dura Automotive Sys (DRRA)* |
8.30 |
17.06 |
8.06 |
153.2 |
8.6 |
0.45 |
0.0 |
currently qualifies |
|
ePlus inc. (PLUS)* |
10.70 |
16.17 |
8.80 |
95.5 |
10.6 |
0.84 |
0.0 |
|
|
Espey Mfg & Elec. (ESP) |
23.69 |
27.35 |
21.00 |
24.0 |
25.2 |
0.88 |
2.5 |
|
|
Gehl Company (GEHL) |
17.80 |
21.50 |
10.72 |
97.6 |
14.8 |
0.91 |
0.0 |
|
|
Gottschalks Inc. (GOT) |
4.82 |
6.48 |
2.53 |
62.1 |
15.1 |
0.58 |
0.0 |
currently qualifies |
|
Haggar Corporation (HGGR) |
18.25 |
22.60 |
14.29 |
131.5 |
9.6 |
0.77 |
1.1 |
currently qualifies |
|
Hardinge Inc. (HDNG) |
10.60 |
13.35 |
7.90 |
93.8 |
na |
0.66 |
0.2 |
earnings probation (2003q3) |
|
Hub Group, Inc. (HUBG) |
29.64 |
39.37 |
10.11 |
296.1 |
19.8 |
1.52 |
0.0 |
|
|
IntegraMed America (INMD) |
6.28 |
8.44 |
5.65 |
22.3 |
22.4 |
0.68 |
0.0 |
currently qualifies |
|
International Shipholding (ISH) |
13.63 |
17.10 |
9.25 |
82.9 |
17.5 |
0.65 |
0.0 |
currently qualifies |
|
Ladish Co., Inc. (LDSH) |
9.06 |
10.23 |
6.00 |
118.0 |
100.7 |
1.00 |
0.0 |
|
|
Lazare Kaplan Intern’l (LKI) |
7.61 |
9.19 |
6.34 |
64.7 |
27.2 |
0.71 |
0.0 |
currently qualifies |
|
Marsh Supermarkets (MARSA) |
11.30 |
14.40 |
9.83 |
89.2 |
26.9 |
0.70 |
4.6 |
currently qualifies |
|
McRae Industries (MRI.A) |
8.75 |
11.75 |
6.44 |
24.2 |
10.4 |
0.74 |
2.7 |
currently qualifies |
|
Metals USA, Inc. (MUSA) |
16.09 |
18.48 |
6.14 |
324.6 |
5.7 |
1.27 |
0.0 |
|
|
Northwest Pipe Co. (NWPX) |
16.90 |
19.50 |
11.85 |
111.7 |
15.0 |
0.82 |
0.0 |
|
|
Pomeroy IT Solutions (PMRY) |
12.72 |
16.18 |
10.59 |
155.7 |
14.5 |
0.76 |
0.0 |
currently qualifies |
|
Quaker Fabric Corp. (QFAB) |
6.68 |
11.00 |
6.40 |
112.4 |
15.5 |
0.66 |
1.8 |
|
|
Rex Stores Corp. (RSC)* |
13.49 |
16.59 |
10.98 |
152.9 |
6.1 |
0.81 |
0.0 |
|
|
Sands Regent (SNDS) |
7.70 |
9.34 |
3.60 |
43.5 |
6.6 |
0.91 |
0.0 |
|
|
Scheid Vineyards Inc. (SVIN) |
5.07 |
6.99 |
3.29 |
27.8 |
9.1 |
0.75 |
0.0 |
|
|
Stephan Co. (TSC) |
6.80 |
7.03 |
3.73 |
30.0 |
75.6 |
0.79 |
1.2 |
|
|
T-3 Energy Services (TTES) |
5.73 |
7.39 |
4.77 |
60.6 |
na |
0.60 |
0.0 |
earnings probation (2003q4) |
|
TESSCO Technologies (TESS) |
10.52 |
19.09 |
7.86 |
46.8 |
10.2 |
0.80 |
0.0 |
|
|
U.S. Lime & Minerals (USLM) |
9.49 |
11.90 |
4.26 |
55.5 |
9.9 |
1.22 |
0.0 |
|
|
Willis Lease Finance (WLFC) |
8.00 |
9.50 |
5.29 |
71.1 |
17.8 |
0.64 |
0.0 |
currently qualifies |
|
Zapata Corporation (ZAP) |
61.00 |
69.00 |
49.00 |
145.9 |
381.3 |
0.80 |
0.0 |
|
* company is new to the list
Explanation of Notes
Source: AAII’s Stock Investor Pro/Reuters. Data as of 9/3/2004. |
|
| Model Fund Portfolio: Style Matters |
|
Because of a change in the calculation method from our data source, style ratings for mutual funds in our Model Fund Portfolio that were published in the August AAII Journal were incorrect.
Our fund style categories are based on the price-to-book value ratios (price per share divided by net assets per share) of the underlying stocks in the fund.
The table below shows the correct style ratings for these funds, and how we break down the categories.
—James B. Cloonan
| Fund (Ticker) |
Style |
| Ariel (ARGFX) | Low Value |
| Exeter Pro Blend (MNBAX) | Low Value |
| Fenimore (FAMVX) | Moderate Value |
| FMI Common Stock (FMIMX) | High Value |
| Mairs & Power Growth (MPGFX) | Moderate Value |
| Meridian Growth (MERDX) | Low Value |
| Meridian Value (MVALX) | Moderate Value |
| Mosaic (GTSGX) | Moderate Value |
| Royce PA (PENNX) | Moderate Value |
| Royce Premier (RYPRX) | Moderate Value |
| Tamarack Micro Value (TMVSX) | Very High Value |
| Thompson Plumb (THPGX) | Low Value |
| T Rowe Price Cap Ap (PRWCX) | High Value |
| Vanguard 500 (VFINX) | Low Value
|
|
| | Category Breakdown |
| Category |
Price-to-Book-Value Ratio |
| Very High Value | 1.49 and below |
| High Value | 1.50 to 2.99 |
| Moderate Value (Blend) | 3.00 to 3.99 |
| Low Value (Growth) | 4.00 to 4.74 |
| Very Low Value (High Growth) | 4.75 and above
| |
|
|
;)
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