John Bajkowski
is the president of AAII.
After the quarterly review of the Model Shadow Stock Portfolio at the beginning of March, one stock is being removed and one stock is being added.
Belief that a so-called “Trump put” would protect the stock market evaporated, as President Trump refused to rule out a recession and continues to modify and escalate tariff policies without presenting a clear long-term strategy. Investors, consumers and businesses tend to pull back in an environment of uncertainty. Investors had bet strongly that Trump’s agenda to lower taxes and drive deregulation would fuel economic growth in a similar way to his first term, during which he frequently touted the stock market’s performance as a barometer of his success.
It can be challenging to stay calm when chaos ensues, yet maintaining a long-term perspective is the key to investing success. Corrections are a regular and expected part of the healthy market cycle. The key is to stay with your planned allocation and investing approach.
The S&P 500 index lost 1.3% during the month, compared to a 2.7% loss for the Model Shadow Stock Portfolio. The S&P MidCap 400 index lost 4.3% during February, while the S&P SmallCap 600 index declined 5.7%. Value-oriented stocks held up better than growth stocks during the month.
Smaller companies continue to lag larger companies for the year. The S&P SmallCap 600 is up 6.3% over the last year, compared to an 8.7% gain for the S&P MidCap 400 and an 18.4% gain for the S&P 500. The Model Shadow Stock Portfolio is down 3.4% over the last year.
In the large-cap segment, growth stocks were down 2.9% for the month, while value was up 0.4%. Large-cap growth stocks are up 22.9% over the last year, compared to a return of 12.3% for large-cap value stocks.
Mid-cap growth stocks lost 5.6% during February, while mid-cap value stocks lost 3.0%. Mid-cap growth stocks are up 3.9% over the last year, compared to a 14.0% gain for mid-cap value stocks.
Small-cap growth stocks lost 5.9% during February and are up 5.5% for the year, while small-cap value stocks declined 5.5% during the month and are up 6.8% over the last year.
Market breadth declined during the month. Within the S&P 500, there were 248 advancing issues, compared to 255 declining issues—a ratio of 0.97, down from 2.38 during January. The ratio was 0.53 for the S&P MidCap 400, down from 2.58 last month. In the S&P SmallCap 600, the ratio was even weaker at 0.43, down from 1.41 observed during January.
Six of the 11 sectors in the S&P 500 were up during February, after 10 were up in January. Consumer staples did best, up 5.6% for February and 16.4% over the last year. Consumer discretionary did the worst, down 9.4% for the month as the market feared that consumers were tightening their purse strings. The difference between the best- and worst-performing sectors widened during February to 15.0 percentage points, compared to 11.9 percentage points last month.
For February, only three of the 11 sectors within the S&P MidCap 400 were up for the month. Utilities was the strongest sector, up 6.6% during the month and 35.5% for the year, while information technology was the weakest, down 10.1% during the month but up 4.1% over the last year.
Only the utilities sector was up in the S&P SmallCap 600 during February. The sector was up 3.1% for the month and 11.0% for the year. Energy was the weakest sector, down 9.8% during the month and 16.8% over the last year.
The Model Shadow Stock Portfolio is reviewed quarterly to determine portfolio deletions and additions. The quarterly review cycle is tied to the reporting cycle of most firms and limits costly portfolio turnover. AAII’s stock analysis and screening service Stock Investor Pro, with data as of February 28, 2025, 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 price-to-book cutoff has decreased slightly from 0.83 in December to 0.82. The current initial qualifying maximum price-to-book ratio is 0.90 and we left it unchanged. Qualifying stocks must have a price-to-book ratio of 0.90 or lower when added to the model portfolio. 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.
Mistras Group Inc. 
(MG) has the highest price-to-book ratio in the model portfolio at 1.60. No stocks in the model portfolio exceeded the maximum price-to-book ratio at the time of review.
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 decreased from $380 million in December to $350 million using data in Stock Investor Pro as of February 28, 2025. 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.
Covenant Logistics Group Inc. (CVLG) had the highest market cap of $620.5 million, but this did not exceed the $1.2 billion market-cap maximum at the time of review.
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, adjusted (non-GAAP) earnings are used to put stocks on probation or remove them.
Companies have additional time to file their fiscal year-end financial statements. While larger companies must file their annual reports 60 days from the year-end, small firms have 90 days to file with the U.S. Securities and Exchange Commission (SEC). The deadlines are shorter for filing quarterly statements: Large companies must file their quarterly reports 40 days from the quarter-end, while smaller firms must file within 45 days. As a result, not all of the Model Shadow Stock Portfolio holdings released their year-end statements at the time of the review.
Clarus Corp. (CLAR) went on earnings probation after reporting a loss for the second calendar quarter. It reported positive adjusted earnings for the third quarter, but a loss during the fourth quarter, and its trailing 12-month earnings are still negative. It is the policy of the Model Shadow Stock Portfolio to remove a stock once its trailing 12-month adjusted earnings go negative and the company reports a subsequent quarterly loss while trailing earnings are still negative. Clarus is being removed from the portfolio due to negative earnings. Clarus was added to the Model Shadow Stock Portfolio on December 12, 2022, at a price of $8.1395 per share. It was deleted on March 13, 2025, at $3.9055 per share, for a price loss of 52.0%.
As of March 12, 32 stocks met the initial selection criteria for the Model Shadow Stock Portfolio. AAII members can see and research which companies are currently passing 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.
Nine qualifying stocks were already in the Model Shadow Stock Portfolio at the time of the review. The remaining 23 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 deletion, as well as the cash held in the portfolio, the Model Shadow Stock Portfolio was able to take a position in one company, although it was below the average position size for the existing holdings in the tracking portfolio.
NCS Multistage is a provider of highly engineered products and support services that enable oil-and-gas operators to optimize oil and natural gas well completions and field development strategies. Its products and services are used primarily by exploration and production companies for onshore wells, predominantly wells that have been drilled with horizontal laterals in unconventional oil and natural gas formations. Its products and services are utilized in oil and natural gas basins throughout North America and in selected international markets, including Argentina, China, the Middle East and the North Sea. The company has a strong presence in Canada, which represented over 60% its consolidated revenue in 2024. A strengthening of the U.S. dollar relative to the Canadian dollar would lower its U.S. dollar reported results. The imposition of tariffs and reciprocal trade actions between the U.S. and Canada could also impact business. NCS Multistage was founded in 2006 and is headquartered in Houston, Texas.
NCS Multistage has a book value per share of $39.42 as of December 31, 2024. If you wish to stay within the 0.90 price-to-book maximum, you should pay no more than $35.48 per share ($39.42 × 0.90). 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 1.00, which equates to a price of $39.42 per share.
The next quarterly review of the Model Shadow Stock Portfolio will take place following the release of first-quarter results at the beginning of June 2025. If there are any changes to the model portfolio, they will be announced at the time with a special Model Shadow Stock Portfolio Update email. Sign up for this email so you don’t miss it!
(03/12/2025)
Alpha Pro Tech reported fourth-quarter 2024 diluted earnings of $0.08 per share, down 12.5% year over year from $0.09 per share. Alpha Pro Tech does not have coverage by S&P Global. Net sales were $57.8 million, down 5.5% from $61.2 million in the prior-year quarter. The decrease was driven by a drop in building supply segment sales.
(03/05/2025)
Amplify Energy reported fourth-quarter 2024 diluted earnings of $0.13 per share, down from $1.09 per share in the prior-year quarter. Earnings were 50.0% lower than the S&P Global consensus estimate of $0.26 per share. Total revenues were $69.0 million, down 12.6% year over year from $79.0 million. The company generated an operating loss of $6.7 million, down year over year from an operating profit of $55.3 million.
Covenant Logistics Group, Inc. (CVLG)
(02/14/2025)
Covenant Logistics Group declared a regular quarterly dividend of $0.07 per share. The dividend is payable on March 28, to shareholders of record as of March 7. The stock will trade ex-dividend on Friday, March 7.
(02/24/2025)
DMC Global reported fourth-quarter 2024 adjusted earnings of $0.09 per share, up from a $0.49 per share loss in the prior-year quarter. Earnings were 131.0% higher than the S&P Global consensus estimate of –$0.29 per share. Net sales were $152.4 million, down 12.4% year over year from $174.0 million. The company reported a net loss of $1.2 million, down 132.0% year over year from net income of $3.6 million.
(02/26/2025)
Escalade reported fourth-quarter 2024 adjusted earnings of $0.19 per share, down 9.5% from $0.21 per share in the prior-year quarter. Escalade does not have earnings coverage by S&P Global. Net sales were $63.9 million, down 2.4% year over year from $65.5 million. Operating income was $4.5 million, down 9.0% year over year from $5.0 million.
(02/18/2025)
Fonar reported diluted earnings of $0.29 per share for its fiscal second-quarter 2025 ended December 31, 2024, down from $0.54 per share in the prior-year quarter. Fonar does not have earnings coverage by S&P Global. Net total revenues were $25.0 million, down 1.7% year over year from $25.4 million. Income from operations was $2.4 million, down 50.2% year over year from $4.9 million.
Landsea Homes Corporation (LSEA)
(02/27/2025)
Landsea Homes reported fourth-quarter 2024 adjusted earnings of $0.25 per share, down from $0.33 per share in the prior-year quarter. Earnings were 46.8% lower than the S&P Global consensus estimate of $0.47 per share. Total revenues were $486.7 million, up 22.4% year over year from $397.6 million, with the lot sales and other segments having the largest percentage growth of over 100%.
(03/05/2025)
Mistras Group reported fourth-quarter 2024 diluted earnings of $0.24 per share, up from a loss of $0.08 per share in the prior-year quarter. Earnings were 100.0% higher than the S&P Global consensus estimate of $0.12 per share. Revenue was $172.7 million, down 5.1% year over year from $182.1 million. Income from operations was $10.5 million, up year over year from $706,000.
(03/05/2025)
NACCO Industries reported the fourth-quarter 2024 diluted earnings of $1.02 per share, up from a loss of $5.88 per share in the prior-year quarter. NACCO Industries does not have earnings coverage by S&P Global. Revenue was $20.4 million, up 3.1% year over year from $19.8 million. The company reported an operating profit of $2.0 million, up year over year from an operating loss of $62.3 million.
(02/20/2025)
NACCO Industries declared a regular quarterly dividend of $0.2275 per share, in line with the prior declaration. The dividend is payable on March 17, to shareholders of record as of March 3. The stock will trade ex-dividend on Monday, March 3.
Pangaea Logistics Solutions Ltd. (PANL)
(03/13/2025)
Pangaea Logistics Solutions reported fourth-quarter 2024 adjusted diluted earnings of $0.16 per share, unchanged year over year. Earnings missed the S&P Global consensus estimate by 5.9%. Total revenues were $147.2 million, up 11.6% from $131.9 million in the prior-year quarter.
During the quarter, Pangaea Logistics Solutions returned $4.8 million in dividends to shareholders.
Park-Ohio Holdings Corp. (PKOH)
(03/05/2025)
Park Ohio Holdings reported fourth-quarter 2024 diluted earnings of $0.67 per share, up from a loss of $1.15 per share in the prior-year quarter. Earnings were 8.1% higher than the S&P Global consensus estimate of $0.62 per share. Net sales were $388.4 million, relatively unchanged year over year from $383.9 million. Operating income was $14.4 million, down 18.6% year over year from $17.7 million.
(02/25/2025)
Rocky Brands reported fourth-quarter 2024 adjusted earnings of $1.19 per share, up 21.4% from $0.98 per share in the prior-year quarter. Earnings were 2.1% lower than the S&P Global consensus estimate of $1.215 per share. Net sales were $128.1 million, up 1.7% year over year from $126.0 million. Income from operations was $8.5 million, down 42.3% year over year from $14.7 million.
(02/18/2025)
Rocky Brands declared a regular quarterly dividend of $0.155 per share, in line with the prior declaration. The dividend is payable on March 17, to shareholders of record as of March 3. The stock will trade ex-dividend on Monday, March 3.
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