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Small-Cap Stocks Lag

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%.

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