John Bajkowski
is the president of AAII.
After the quarterly review of the Model Shadow Stock Portfolio at the beginning of June, five stocks are being removed and five stocks are being added.
The Model Shadow Stock Portfolio gained 5.6% in May, outperforming all three benchmark indexes. Vanguard 500 Index fund (VFINX) rose 5.3%, Vanguard Small Cap Index fund (NAESX) gained 3.2% and Dimensional Fund Advisors’ DFA U.S. Micro Cap I fund (DFSCX) advanced 1.5%. The portfolio’s one-year return reached 71.9%, more than doubling the gains of the broad market and significantly exceeding both small- and micro-cap benchmarks.
Market sentiment improved throughout May as concerns about inflation and geopolitical tensions eased. Strong first-quarter 2026 earnings results and continued enthusiasm surrounding artificial intelligence (AI) infrastructure spending helped drive a broad market rally, led by technology stocks. The S&P 500 index reached new highs during the month as investors increasingly focused on corporate earnings growth and the potential for lower interest rates later in the year.
In the large-cap segment, growth stocks were up 8.1% for the month, while value stocks were up 2.0%. Large-cap growth stocks are up 36.1% over the last year, compared to a return of 22.7% for large-cap value stocks.
Mid-cap growth stocks gained 4.9% during May, while mid-cap value stocks lost 0.1%. Mid-cap growth stocks are up 30.4% over the last year, compared to a 21.3% gain for mid-cap value stocks.
Small-cap growth stocks gained 1.1% during May and are up 28.5% over the last year, while small-cap value stocks gained 1.0% during the month and are up 38.7% over the last year.
While May favored large-cap companies, small-cap indexes are still stronger year to date. The Model Shadow Stock Portfolio is up 34.2% year to date, while Vanguard Small Cap Index is up 14.2% and DFA U.S. Micro Cap I is up 16.1%. The S&P 500 as represented by Vanguard 500 Index is up 11.2% over the same period.
While large-cap technology stocks remained market leaders, May also had increased participation from select industrials, materials and smaller-cap companies. This environment benefited several Model Shadow Stock Portfolio holdings, particularly companies tied to specialized manufacturing, logistics and industrial end markets. Vishay Precision Group Inc. 
(VPG), the portfolio’s top performer, surged 107.4% during the month following strong earnings results, rising demand for its precision measurement technologies, and growing investor interest in AI infrastructure and robotics-related applications.
From a style perspective, growth stocks continued to outperform value stocks across most capitalization ranges during May, although the gap narrowed among smaller companies. Sector leadership was concentrated in information technology, while energy was the weakest-performing sector, as oil prices declined following optimism surrounding a potential U.S.-Iran agreement. The portfolio’s three weakest performers—Amplify Energy Corp. (AMPY), Oil States International Inc. (OIS) and NCS Multistage Holdings Inc. (NCSM)—all came from the energy sector and were negatively impacted by the retreat in oil prices.
Overall, May’s market environment was supportive of the Model Shadow Stock Portfolio’s diversified exposure to smaller companies, with strong gains from industrials and technology-oriented holdings more than offsetting weakness in energy-related positions. The result was another month of benchmark-beating performance and a continuation of the portfolio’s exceptional one-year return profile.
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 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 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. Qualifying stocks must have a price-to-book ratio of 1.00 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.
Portfolio Deletion: Vishay Precision Group Inc.
Vishay Precision Group had the highest price-to-book ratio in the model portfolio at 4.67, exceeding the maximum threshold. Vishay Precision Group’s 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 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%.
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 had the highest market cap of $1.563 billion, exceeding 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, 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. (BOOM)
DMC Global 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 is being removed from the portfolio due to negative earnings. DMC Global was added to the Model Shadow Stock 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. (LAKE)
Lakeland Industries 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 is being removed from the portfolio due to negative earnings. Lakeland Industries was added to the Model Shadow Stock 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. (SGA)
Saga Communications 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 is being removed from the portfolio due to negative earnings. Saga Communications was added to the Model Shadow Stock 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%.
Portfolio Deletion: Fonar Corp. (FONR)
Fonar 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 the company’s tenure as a publicly traded company.
Fonar was added to the Model Shadow Stock 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%.
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 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 candidates such as Gencor Industries Inc. (GENC) and Motorcar Parts of America Inc. (MPAA) above the maximum 1.00 level. As such, only five stocks are being added at this time and the portfolio will hold some addition cash for now.
(CMCO)Columbus McKinnon 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 $32.49 per share. If you wish to stay within the 1.00 price-to-book maximum, you should pay no more than $32.49 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 $35.74 per share.
(HDSN)Hudson Technologies 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 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 $6.22 per share.
(KGEI)Kolibri Global 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 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 $6.49 per share.
(MHH)Mastech Digital 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 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 $8.35 per share.
(USNA)USANA Health Sciences 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.
The next quarterly review of the Model Shadow Stock Portfolio will take place following the release of second-quarter 2026 earnings results at the beginning of September. 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!
(05/21/2026)
Euroseas reported first-quarter 2026 adjusted diluted earnings of $4.70 per share, up 24.9% from $3.76 per share in the prior-year quarter. Earnings were 9.6% above the S&P Global consensus estimate of $4.29 per share. Net revenues were $55.8 million, down 0.9% year over year from $56.3 million. The average time charter equivalent (TCE) rate was $30,354 per day, up 10.1% year over year. However, the company operated an average of 21.0 vessels, down from 23.68 vessels in the prior-year quarter, more than offsetting growth in the average TCE rate. Net income was $32.5 million, down 11.9% year over year from $36.9 million, due to the absence of a $10.23 million vessel sale gain recorded in the prior-year quarter. Adjusted EBITDA was $40.9 million, up 10.2% year over year from $37.1 million.
Gilat Satellite Networks Ltd. (GILT)
(05/13/2026)
Gilat Satellite reported first-quarter 2026 adjusted earnings of $0.18 per share, up 500% from $0.03 per share in the prior-year quarter. Earnings were 350.0% above the S&P Global consensus estimate of $0.04 per share. Revenues were $110.5 million, up 20% year over year from $92.0 million. Net income was $5.2 million, up from a loss of $6.0 million in the prior-year quarter. Adjusted EBITDA was $15.1 million, up from $7.6 million in the prior-year quarter.
NCS Multistage Holdings, Inc. (NCSM)
(06/01/2026)
NCS Multistage is being acquired by Weatherford International PLC (WFRD). The deal combines NCS Multistage’s engineered completion technologies and expertise in unconventional resource development with Weatherford’s existing well construction and production offerings, creating opportunities to expand the adoption of NCS Multistage products across a wider customer base. For NCS Multistage shareholders, the transaction provides consideration in Weatherford stock or a combination of stock and cash, while positioning the company’s technologies and employees within a larger organization with greater scale and resources. The companies expect the acquisition to enhance growth opportunities, improve market penetration and create value through operational synergies. The deal is anticipated to close in the second half of 2026, subject to regulatory approvals and customary closing conditions.
(06/05/2026)
StealthGas reported first-quarter 2026 adjusted earnings of $0.40 per share, down 9.1% from $0.44 per share in the prior-year quarter, due to increased drydock expenditures. StealthGas does not have earnings coverage by S&P Global. Revenues were $42.8 million, up 1.9% year over year from $42.0 million.
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