The August 2015 passing company lists and performance data is now available on-line.
Posted on August 17, 2015 | Stock Screens
YTD Return of Top Performers: Foolish Small Cap 8: 70.9% — O’Neil’s CAN SLIM Revised 3rd Edition: 45.6%
Placing Trades for New Portfolio Additions
Posted on August 14, 2015 | Dividend Investing
This week the markets responded negatively to the People’s Bank of China devaluing the yuan by roughly 2% on Tuesday, causing the currency to fall to a four-year low on Wednesday. The currency devaluation caused investors to express concern regarding the health of the global economy.
Home Sales Expected to Heat Up
Posted on August 14, 2015 | Stock Superstars Report
While currency fluctuations are not a component of the SSR approach, the slowdown in China and the government’s willingness to devalue the yuan made headlines in the early part of the week. The announcement was a surprise to the market. Many market participants viewed the devaluation as an attempt to boost Chinese companies at the expense of foreign competitors. Foreign companies could be hurt by this devaluation primarily in two ways. One way would be that Chinese products could be less expensive, toughening the competitive landscape. The second way could hurt non-Chinese companies: Any profits they do earn in yuan could now be worth less when converted back to their home currency.
Small-Cap Stocks Lag
Posted on August 14, 2015 | Model Portfolios
Performance in July varied significantly among the major indexes, with large-cap stocks outperforming small-cap stocks. The S&P 500 index’s total return was up 2.1%, which was similar to the performance of larger-capitalization indexes for the month of July.
The Model Fund Portfolio was declined by 0.7% in July, while the Model Shadow Stock Portfolio, which invests in micro-cap value stocks, was down 6.0%.
The Model Shadow Stock Portfolio’s underperformed both of its comparison benchmarks: The Vanguard Small Cap Index fund (NAESX) declined 0.3% and the DFA U.S. Micro Cap Index fund (DFSCX) was down 2.4%. The Model Shadow Stock portfolio was hurt by weak performances in July from Rex American Resources (REX), SigmaTron International (SGMA) and Universal Stainless & Alloy (USAP); these three companies accounted for more than half of the portfolio’s decline in July. Year to date, the Model Shadow Stock Portfolio has declined 2.6%, while the Vanguard Small Cap Index fund is up 3.8% and the DFA U.S. Micro Cap Index fund is up 1.7%. Since its inception in 1993, the Model Shadow Stock Portfolio has a compound annual average return of 16.3%, while the Vanguard Total Stock Market Index fund (VTSMX) has gained 9.3%.
The Model Fund Portfolio’s 0.7% decline in July compared to a 1.6% increase 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 8.9%, slightly trailing the Vanguard Total Stock Market Index fund over the same time period, which gained 9.4%.
One-Half of Members Favor CEO Compensation Transparency
Posted on August 13, 2015 | AAII Survey
This week’s Sentiment Survey special question asked AAII members what they think about the new requirement for companies to disclose how CEO compensation compares to the median compensation for all employees. Half of all respondents were in favor of the rule. Many favor the increased level of transparency, saying shareholders have a right to the information. Several others brought up the issue of excessive CEO compensation. About 4% of all respondents used the word “great” to describe the new requirement.
Not everyone was in favor of the new rule. Slightly more than a quarter of all respondents (26%) disfavor the new rule or think it’s a bad idea. Common themes in their responses were that the rule amounts to government interference, it’s unnecessary or it is politically motivated. An additional 13% of respondents said the rule won’t lead to any significant changes in compensation.
Here is a sampling of the responses:
- “I think this is great. CEO compensation for a lot of companies has gotten out of hand.”
- “Excellent idea! This can be another metric for CEO accountability to shareholders.”
- “The more transparency the better. I like the rule.”
- “Do not like, it is a politically correct activity and not something to protect investors.”
- “I see no value in it. Regulators are again overstepping their authority.”
- “I’m not sure what effect it will have. We already know that many CEOs are overpaid.”
AAII Sentiment Survey: Neutral Sentiment Matches a Record Despite Plunging
Posted on August 13, 2015 | AAII Survey
Neutral sentiment plunged to a four-month low, as both optimism and pessimism both rose in the latest AAII Sentiment Survey. Nonetheless, neutral sentiment still matched a record set last year.
Bullish sentiment, expectations that stock prices will rise over the next six months, jumped 6.1% percentage points to 30.5%. The rise is not large enough to prevent optimism from being below its historical average of 39.0% for a 23rd consecutive week, the longest such streak since a 29-week stretch in 1993.
Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, fell 10.6 percentage points to 33.4%. This is the lowest neutral sentiment has been since April 2, 2015 (32.6%). Even with the large drop, neutral sentiment is above its historical average of 31.0% for a 32nd consecutive week. This ties the record for the longest streak of consecutive weeks with an above-average reading, which was set between January and August of last year.
Bearish sentiment, expectations that stock prices will fall over the next six months, rebounded by 4.5 percentage points to 36.1%. The rise keeps pessimism above its historical average of 30.0% for a third consecutive week.
This is only the second time in approximately two years that bearish sentiment has been above 30% for a period of three consecutive weeks. The last time this occurred was October 16, 2014. We point this out to show how pessimism has largely been staying at low levels. During the past two years, the level of pessimism registered by our survey has averaged 26.5%. It is too early to say whether the recent occurrences of above-average bearish sentiment (six out of the past 10 weeks) is a sign of the pendulum swinging back the other way or if it’s just just a temporary blip in a longer-term trend.
Giving AAII members reasons for caution are concerns about the possibility of a sizable decline in stock prices occurring, the pace of economic growth, the lack of wage growth, valuations, the impact of the stronger dollar on earnings and geopolitical events. The lack of market breadth and ongoing volatility are also playing a role. Keeping other AAII members optimistic is the Federal Reserve’s still-accommodative monetary policy, the ongoing bull market, sustained economic expansion and earnings growth.
This week’s AAII Sentiment Survey
- Bullish: 30.5%, up 6.1 percentage points
- Neutral: 33.4%, down 10.6 percentage points
- Bearish: 36.1%, up 4.5 percentage points
- Bullish: 39.0%
- Neutral: 31.0%
- Bearish: 30.0%
The AAII Sentiment Survey has been conducted weekly since July 1987 and asks AAII members whether they think stock prices will rise, remain essentially flat or fall over the next six months. The survey period runs from Thursday (12:01 a.m.) to Wednesday (11:59 p.m.). The survey and its results are available online at: http://www.aaii.com/sentimentsurvey.
Sell OF THE WEEK 8/12/2015
Posted on August 12, 2015 | Podcast
AAII Journal Editor Charles Rotblut explains to Chuck Jaffe of MarketWatch why Micron Technology (MU) is his “Sell of the Week” on the MoneyLife Radio Program. MoneyLife is a daily personal finance show that sorts through the financial clutter to bring you the information you need to lead the MoneyLife.
Audio url: Sell of the week
BUY OF THE WEEK 8/11/2015
Posted on August 11, 2015 | Podcast
AAII Journal Editor Charles Rotblut explains to Chuck Jaffe of MarketWatch why Lam Research Corporation (LRCX) is his “Buy of the Week” on the MoneyLife Radio Program. MoneyLife is a daily personal finance show that sorts through the financial clutter to bring you the information you need to lead the MoneyLife.
Audio url: Buy of the week
Three Stocks Out and Two Stocks In
Posted on August 7, 2015 | Dividend Investing
This is why we roll our eyes when we hear or see “news” alerts about the Dow Jones industrial average being down by “triple-digits.” While a 100-point move may sound big, it’s less than a one percentage point change. Reacting to every headline and alert is not only senseless but will also rack up large amounts of trading and tax costs. While a disciplined strategy may stumble from time to time, the long-term returns from sticking with a good strategy will be far higher than those from being reactive to Mr. Market’s whims ever will be.
Second-Quarter Earnings Highlights
Posted on August 7, 2015 | Stock Superstars Report
As we move out of earnings season and the end of summer beckons, let’s take a moment for a quick look back at the nearly completed second-quarter earnings season. The numbers offer a mixed picture for investors.
According to Thomson Reuters, using data as of August 7, 70% of the 440 S&P 500 companies reporting had earnings above the mean estimate. Thirty-two of the 36 SSR portfolio companies have reported second-quarter results, and of these 69% beat their I/B/E/S consensus earnings estimates.