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A Spring Bounce

April AAII Model Portfolio Update is now available online.

Spring is in the air as temperatures warm up to a tolerable level here in Chicago. The S&P 500 index’s total return was down 1.6% for March, fairly typical of index performance for the month.

The Model Fund Portfolio was flat for the month, declining only 0.1%, while the Model Shadow Stock Portfolio, which invests in micro-cap value stocks, gained 4.6%.

The Model Shadow Stock Portfolio’s 4.6% increase for March handily beat both of its comparison benchmarks: The Vanguard Small Cap Index fund (NAESX) gained 1.2% and the DFA US Micro Cap Index fund (DFSCX) gained 2.3% in March. Year to date, the Shadow Stock Portfolio has gained 5.5%, while the NAESX is up 4.7% and the DFSCX is up 3.1% over the same time period. Since its inception in 1993, the Model Shadow Stock Portfolio has a compound annual average return of 17.0%, while the Vanguard Total Stock Market Index fund (VTSMX) has gained 9.4% annually over the same period.

The Model Fund Portfolio’s 0.1% decline in March compared to a 1.0% decrease for the Vanguard Total Stock Market Index fund. Since its inception in June of 2003, the Model Fund Portfolio has a compound annual average return of 9.3%, slightly trailing the Vanguard Total Stock Market Index fund over the same time period, which gained 9.5%.

April Updates
There are no changes to the Model Shadow Stock Portfolio this month. Six stocks passed the screen at the start of April.

No stocks in the portfolio qualified for purchase at the start of April. Qualified stocks are companies held within the Model Shadow Stock Portfolio that currently meet the purchase rules. (They are designated as “qualified” in the notes column of the Model Shadow Stock Portfolio table.)

Kimball International, Inc. (KBAL) is currently above the Model Shadow Stock Portfolio’s valuation limit. Stocks are eligible for deletion if their price-to-book ratio exceeds 2.4. Kimball International ended March with a price-to-book ratio of 2.79, which makes it eligible for deletion at the portfolio’s next quarterly review in June.

Two stocks in the portfolio have been put on earnings probation because their last 12 months of earnings from continuing operations are negative: International Shipholding Corp. (ISH) and Olympic Steel Inc. (ZEUS). Stocks on probation are potential sell candidates at the next quarterly review in June.

Click here to see the current purchase and sell rules. The size and value rules of the Model Shadow Stock Portfolio are subject to revision depending on prevailing market conditions.

There were no changes to the Model Fund Portfolio this month. The portfolio’s quarterly review will appear in the May issue of the AAII Journal, which will be posted at AAII.com at the beginning of May.