After conducting the quarterly review of the Model Shadow Stock Portfolio, one stock was removed from the tracking portfolio. No new stocks were added to the portfolio at this time.
Sell Alert
Roadrunner Transportation Systems Inc. (RRTS) announced on January 30, 2017, that in November 2016, management was made aware of “various potential accounting discrepancies” at multiple operating subsidiaries. As a result, the company announced that it would restate its financial statements for the annual periods ending December 31, 2014, and December 31, 2015, and for multiple quarterly periods. Also, this restatement delayed the release of 10-K reports for the periods ended December 31, 2016, and December 31, 2017. Roadrunner recently filed its 10-K for the period ended December 31, 2017. This, along with its 2016 10-K report, shows that the company generated annual losses from continuing operations of $9.40 and $2.57 per share for 2016 and 2017, respectively. As a result, the company triggered the portfolio’s earnings sell rule and was removed from the Model Shadow Stock Portfolio.
Buy Alert
The portfolio management rules of the Model Shadow Stock Portfolio encourage investing in positions roughly equal to the average position size of the portfolio. This avoids investing in overweighted or underweighted positions, thereby diminishing the diversification impact of a given stock. Roadrunner dropped so far in price that the proceeds from the sale plus the portfolio’s existing cash balance did not provide enough cash to buy a new position. Cash is less than 1% of the actual portfolio, so no stocks were added this quarter.
Monthly Update
The next monthly Model Portfolios Update will take place on Friday, September 14. On that day, the monthly Model Portfolios Update email will go out and the Model Portfolios area of AAII.com will be updated with new data and the portfolio changes outlined in this email.
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