A Mixed Bag for June

July AAII Model Portfolio Update is now available online.

Despite some turbulence from China and Greece, the markets were only modestly down during the month. The S&P 500 index’s total return was down 1.9%, which was similar to the performance of most indexes for the month of June.

The Model Fund Portfolio was down for the month by 2.1%, while the Model Shadow Stock Portfolio, which invests in micro-cap value stocks, was up 2.4%.

The Model Shadow Stock Portfolio’s 2.4% increase for June beat both of its comparison benchmarks: The Vanguard Small Cap Index fund (NAESX) declined 0.9% and the DFA US Micro Cap Index fund (DFSCX) gained 1.6% in June. Year to date, the Shadow Stock Portfolio has gained 3.6%, while the NAESX is up 4.1% and the DFSCX is up 4.2% over the same time period. Since its inception in 1993, the Model Shadow Stock Portfolio has a compound annual average return of 16.7%, while the Vanguard Total Stock Market Index fund (VTSMX) has gained 9.3% annually over the same period.

The Model Fund Portfolio’s 2.1% decline in June compared to a 1.7% decline 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 9.0%, slightly trailing the Vanguard Total Stock Market Index fund over the same time period, which gained 9.3%.

June Updates
There are no changes to the Model Shadow Stock Portfolio this month. Twenty-two stocks passed the screen at the end of June.

Six stocks in the portfolio qualified for purchase at the end of June: L.S. Starrett Co. (SCX), Salem Media Group Inc. (SALM), SigmaTron International (SGMA), Ultra Clean Holdings Inc. (UCTT), Universal Stainless & Alloy Products (USAP) and Willis Lease Finance Corp. (WLFC). 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.) Among that group Ultra Clean Holdings was the only new addition in June 2015.

No stocks currently in the portfolio are approaching their value or size limit. No stocks are currently on probation for producing negative earnings over the last four quarters. Stocks approaching a limit or on earnings probation are potential sell candidates at the next quarterly review in September. 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 August issue of the AAII Journal, which will be posted at AAII.com at the beginning of August.