Large growth stocks continue to lead the market.
As of August 31, the year-to-date return for the S&P 500 index, as measured by the Vanguard 500 Index fund 
(VFINX), leads that of the Model Shadow Stock portfolio, 11.8% to 4.8%.
The longer-term performance can be viewed in the Historical Return Chart and Year-to-Year Performance webpage.
The stocks currently in the Model Shadow Stock Portfolio can be viewed here.
Ultra Clean Holdings Inc. (UCTT) continued to exceed the 3.0 price-to-book limit. But this quarter there were qualifying stocks to replace it, so Ultra Clean Holdings was sold during the quarterly review at the end of August.
There were six non-Chinese stocks that passed our screen. Two of them were already held in the portfolio. Another one did not qualify since it is basically a lending facility and financial stocks are not purchased under the portfolio rules. That left three stocks. Fortunately, Ultra Clean Holdings had tripled in price since being added to the portfolio, so the funds to buy all three were available.
The three new additions are:
(STRT): maximum price to pay, $50.60The maximum price to pay is the price at which each would still qualify under the price-to-book requirement of 1.00, based on the closing stock price as of August 31.
I would like to point out that in buying these stocks a bit of patience is usually rewarded.
I should also point out that while Ultra Clean Holdings is no longer a micro-cap stock, it has not violated any earnings requirement. Those of you who have the funds and invest in stocks other than micro-caps might wish to keep it.
Global Power Equipment Group (GLPW) has not provided the anticipated earnings update as of this writing, but their new loan agreement requires restatement to be completed by the time you read this. Once the impact is known, as well as whether the stock will be relisted on Nasdaq, a decision will be made about holding or selling.
Roadrunner Transportation Systems (RRTS) still has not completed all past earnings adjustments, but the company appears to have current positive earnings. It will continue to be held unless it violates a rule.
The large contingent of individual investors and pundits who feel that the market is significantly overpriced keeps growing as the market continues upward. In the face of political warfare, nuclear threats and disastrous weather the stock market hangs in. While there certainly could be a pullback now or after another 20% rise, absent a major catastrophe I don’t feel there is likely to be a major pullback (over 20%) for quite some time. I want to repeat the viewpoint I have previously expressed:
“Downside portfolio risk of loss is limited and temporary. Upside risk of loss from being out of the market can be infinite and is permanent.”
The Model Shadow Stock Portfolio will be reviewed again in the January issue. In the meantime, please keep up with portfolio news at the Model Portfolios area.
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since inception!
