John Bajkowski
is the president of AAII.
The Model Shadow Stock Portfolio gained 3.2% in August, increasing its year-to-date return to 40.3%. The portfolio outperformed Vanguard 500 Index fund (VFINX), which gained 2.7% during the month, Vanguard Small Cap Index fund (NAESX), which rose 1.3%, and DFA U.S. Micro Cap fund (DFSCX), which declined 0.1%. The Model Shadow Stock Portfolio also remains well ahead of all three benchmarks year to date and over the trailing year; the portfolio has a one-year return of 56.3%, compared to one-year gains ranging from 19.8% to 26.6% for the benchmarks.
Unlike earlier months of the year, August favored large-cap stocks. The S&P 500 index gained 2.7%, while the S&P MidCap 400 index edged up 0.2% and the S&P SmallCap 600 index declined 0.6%. Market breadth reflected this weaker environment for smaller stocks, with declining issues outnumbering advancing issues among both mid- and small-cap companies. Despite August’s reversal, small-cap stocks remain the strongest size segment year to date, with the S&P SmallCap 600 up 20.8%, compared to gains of 14.7% for the S&P MidCap 400 and 13.1% for the S&P 500.
Style performance was mixed. Large- and mid-cap growth outperformed value in August, gaining 3.3% and 1.1%, respectively. Among small-cap stocks, however, value gained 0.5% while growth declined 1.8%. Year to date, small-cap growth and value have performed almost identically, rising 20.7% and 20.9%, respectively.
Sector performance was sharply divided. The energy and materials sectors were strong across all three capitalization ranges; the energy sector gained between 5.9% and 8.5%, and the materials sector advanced between 5.0% and 8.6%. The information technology sector was also strong among large- and mid-cap stocks but declined 3.2% among small caps. Utilities, industrials, real estate and communication services stocks generally struggled during the month. The energy sector remains the clear leader year to date, with gains ranging from 44.2% to 48.1%, while the information technology sector has also posted particularly strong gains among mid- and small-cap stocks.
The Model Shadow Stock Portfolio’s 3.2% August gain was especially notable given the generally weaker performance of smaller companies. Strong gains from Amplify Energy Corp. 
(AMPY), Friedman Industries Inc. (FRD), Kolibri Global Energy Inc. (KGEI) and Mistras Group Inc. (MG) helped the portfolio overcome significant declines in several holdings and outperform its small- and micro-cap benchmarks.
Since its inception in 1993, the AAII Model Shadow Stock Portfolio has a compound average annual return of 14.2%, versus Vanguard 500 Index’s average annual gain of 10.9% and Vanguard Small Cap Index’s average annual gain of 10.2% over the same period.
Friedman Industries was the Model Shadow Stock Portfolio’s strongest performer in August, gaining 30.1% after reporting record quarterly sales volume, a 78% increase in revenue and sharply higher earnings. Amplify Energy rose 25.8%, helped by improving production, favorable operating developments and strength in energy stocks. Mistras Group gained 23.3% after reporting strong growth in the infrastructure, power generation, and aerospace & defense markets and raising its full-year 2026 revenue and earnings guidance. Kolibri Global advanced 16.2% after revenue more than doubled and production increased 46%. Castor Maritime Inc. (CTRM) rounded out the top five holdings with a 14.9% gain as shipping rates remain high due to the continued Middle East conflict.
USANA Health Sciences Inc. (USNA) was the portfolio’s weakest performer, falling 35.5% after reporting lower sales, an adjusted quarterly loss and reduced full-year expectations for several of its businesses. Smith Douglas Homes Corp. (SDHC) declined 18.5%, as weaker margins and earnings overshadowed growth in home closings and orders. Hudson Technologies Inc. (HDSN) fell 11.6%, as lower refrigerant pricing pressured margins and earnings despite higher sales volume. Gilat Satellite Networks Ltd. (GILT) declined 10.4% despite generally solid quarterly operating results. NACCO Industries Inc. (NC) fell 9.7% following impairment charges related to solar development projects and expectations for more moderate operating performance during the second half of the 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 September 11, 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 0.97 in June to 0.99. The cutoff was 0.92 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: NCS Multistage Holdings
NCS Multistage Holdings Inc. (NCSM) was removed from the Model Shadow Stock Portfolio following the completion of its acquisition by Weatherford International PLC (WFRD). The transaction closed on September 1, and the portfolio’s NCS Multistage shares were exchanged for Weatherford International shares on September 2. As merger consideration, NCS Multistage shareholders were entitled to receive Weatherford International shares or a combination of Weatherford International shares and cash. Weatherford International does not meet the Model Shadow Stock Portfolio’s market-cap size or price-to-book requirements, so the Weatherford International shares received in the transaction are being removed rather than retained in the portfolio.
Outside of Weatherford International, Mistras Group had the highest price-to-book ratio among the portfolio holdings at 2.59, below the 3.00 maximum at the time of the 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 $420 million in June to $407 million using data in Stock Investor Pro as of September 11, 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.
Outside of Weatherford International, Covenant Logistics Group Inc. (CVLG) had the highest market cap in the portfolio at $912.1 million, below 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 before trailing 12-month earnings become positive, the stock is deleted. When available, normalized (non-GAAP) earnings are used to place stocks on probation or remove them.
No holdings were on earnings probation at the start of the quarterly reporting season, and no current holdings were placed on earnings probation during the quarter.
As of September 14, 27 stocks met the initial selection criteria for the Model Shadow Stock Portfolio. AAII members can see and research companies 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.
Four of the 27 qualifying stocks were already in the Model Shadow Stock Portfolio at the time of the review. The remaining 23 stocks were examined for 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, two holdings were added to the Model Shadow Stock Portfolio at position sizes just below the average position size. Following this review, Jerash Holdings (US) Inc. (JRSH) and Smart Sand Inc. (SND) were selected for their attractive valuations, relatively strong financial positions and recent price performance.
Jerash Holdings manufactures and exports custom, ready-made sportswear and outerwear for leading global brands and retailers, including VF Corp. (VFC)—which owns brands such as The North Face, Timberland and Vans—New Balance Athletics Inc., G-III Apparel Group Ltd. (GIII)—which licenses brands such as DKNY and Nautica—Acushnet Holdings Corp. (GOLF)—which owns the brand FootJoy—American Eagle Outfitters Inc. (AEO) and Skechers U.S.A. Inc. The company primarily manufactures its products at facilities in Jordan. Jerash Holdings was incorporated in 2016 and is based in Fairfield, New Jersey.
Jerash Holdings has a current book value of $5.20 per share. If you wish to stay within the 1.00 price-to-book maximum, you should pay no more than $5.20 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 $5.72 per share.
Smart Sand is a fully integrated supplier of frac and industrial sand as well as related logistics services in the U.S. and Canada. The company provides mine-to-wellsite proppant solutions to oil and natural gas producers and oilfield service companies. Its sand segment produces and sells frac sand and industrial products, while its SmartSystems segment provides portable wellsite sand storage and management equipment and related services.
Smart Sand has a current book value of $6.11 per share. If you wish to stay within the 1.00 price-to-book maximum, you should pay no more than $6.11 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 $6.72 per share.
The addition of Jerash Holdings and Smart Sand reflects the Model Shadow Stock Portfolio’s disciplined focus on smaller companies trading at low valuations. While individual holdings can experience significant price swings, the strategy seeks to maintain a diversified portfolio of qualifying stocks and relies on consistent application of its value, size and earnings rules rather than short-term market forecasts.
The next quarterly review of the Model Shadow Stock Portfolio will take place following the release of third-quarter 2026 earnings results at the beginning of December. 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!
(09/14/2026)
Castor Maritime reported second-quarter 2026 earnings of $0.31 per share, up from $0.10 per share in the prior-year quarter. Castor Maritime does not have earnings coverage by S&P Global. Total revenues were $25.6 million, up 42.5% year over year to from $17.9 million. Vessel revenues were $14.9 million, up 46.1% year over year. Services revenues from the MPC Capital subsidiary were $10.7 million, up 37.2% year over year. Net income attributable to common shareholders was $16.4 million, up from $3.3 million in the prior-year quarter. The company recognized a $23.1 million noncash fair value gain on its shares in MPC Container Ships ASA.
(08/13/2026)
Euroseas reported second-quarter 2026 adjusted diluted earnings of $4.70 per share, up 11.9% from $4.20 per share in the prior-year quarter. Earnings were 10.8% above the S&P Global consensus estimate of $4.24 per share. Total net revenues were $56.5 million, down 1.2% year over year from $57.2 million. Net income attributable to controlling shareholders was $33.2 million, up 11.2% year over year from $29.9 million. Adjusted EBITDA was $40.1 million, up 2.0% year over year. CEO Aristides Pittas described first- and second-quarter 2026 as two of the company’s the most profitable quarters over the last 15 years.
Kimball Electronics, Inc. (KE)
(08/12/2026)
Kimball Electronics reported an adjusted diluted loss of $0.01 per share for its fiscal fourth-quarter 2026 ended June 30, down from adjusted diluted earnings of $0.34 per share in the prior-year quarter. The loss was 102.6% below the S&P Global consensus estimate of $0.392 per share. Net sales were $371.6 million, down 2.3% year over year from $380.5 million. GAAP net income was $8.5 million, up 29.4% year over year from $6.6 million.
Kolibri Global Energy Inc. (KGEI)
(08/13/2026)
Kolibri Global reported second-quarter 2026 diluted earnings of $0.23 per share, up 187.5% from $0.08 per share in the prior-year quarter. Revenue was a record $22.5 million, up 109% year over year from $10.8 million. Net income was $8.5 million, up 197% year over year from $2.9 million, driven by a 46% increase in average production and a 41% increase in average realized price to $66.50 per barrel of oil equivalent (BOE). Adjusted EBITDA was $16.4 million, more than doubled from $7.7 million in the prior-year quarter. Netback from operations was $43.92 per BOE, up 48% year over year.
Pangaea Logistics Solutions Ltd. (PANL)
(08/11/2026)
B. Riley Securities maintained its buy rating of Pangaea Logistics Solutions and lowered its price target from $11 to $9 per share. Pangaea Logistics Solutions closed at $6.91 per share on Tuesday, August 11, 2026.
(09/01/2026)
Regis reported adjusted diluted earnings of $1.04 per share for its fiscal fourth-quarter 2026 ended June 30, up 40.5% from $0.74 per share in the prior-year quarter. Earnings were 511.8% above the S&P Global consensus estimate of $0.17 per share. Consolidated revenue was $56.0 million, down 7.3% year over year from $60.4 million. The decline was driven primarily by lower non-margin franchise rental income as fewer franchisees rely on Regis for lease pass-through arrangements. Adjusted EBITDA was $9.2 million, down from $9.7 million in the prior-year quarter.
Regis also reported results for its fiscal-year 2026. Revenue was $224.5 million, up 6.8% year over year. Adjusted diluted earnings were $2.70 per share, down 5.3% year over year. Adjusted EBITDA was $32.8 million, up 5.0% year over year from $31.6 million.
(09/02/2026)
StealthGas reported second-quarter 2026 earnings of $0.46 per share, down 16.4% from $0.55 per share in the prior-year quarter. StealthGas does not have earnings coverage by S&P Global. Revenues were $42.9 million, down 9.2% year over year from $47.2 million. Net income was $17.3 million, down 15.3% year over year from $20.4 million. Adjusted EBITDA was $22.0 million, down 21.9% year over year from $28.2 million.
(08/11/2026)
Eastern Co. reported second-quarter 2026 adjusted diluted earnings of $0.15 per share, down 73.7% from $0.57 per share in the prior-year quarter. Eastern Co. does not have coverage by S&P Global. Net sales were $61.8 million, down 12% year over year from $70.2 million, primarily due to lower sales of truck mirror assemblies and returnable transport packaging. Gross margin was 20.6%, down from 23.3% in the prior-year quarter. Adjusted EBITDA from continuing operations was $3.4 million, down 49% year over year from $6.7 million.
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