Stock Portfolio Update: Small Caps Blast Off
By: Christopher Mistal
November 17, 2016
Last week the Russell 2000 index of small-cap stocks enjoyed its sixth best weekly gain ever, up 10.2%. It narrowly missed besting its most recent and fifth place overall 10.3% weekly gain from December 2, 2011. Russell 2000 is also trading at new all-time highs above 1300. Small caps have finally caught up. Technology shares are now the laggard that is holding back market.
[DJIA Daily Bar Chart]
[Russell 2000]
[S&P 500 Daily Bar Chart]
[NASDAQ Daily Bar Chart]
Looking at the above four charts we can see DJIA and Russell 2000 have broken out to trade at new all-time highs while NASDAQ and S&P 500 have not. Today’s gains have moved S&P 500 and NASDAQ closer to breaking out, but their respective old highs appear to be formable resistance. If S&P 500 and NASDAQ can break out and join DJIA and Russell 2000 with new all-time highs, then this rally has much better odds of surviving to yearend and beyond.
Portfolio Updates
In the three weeks since last update, S&P 500 was up 1.6% while Russell 2000 gained a whopping 7.1% as of yesterday’s close. The Almanac Investor Stock Portfolio’s blend of cash and long positions resulted in a respectable 2.6% overall gain over the same time period. Large-cap stocks in our portfolio performed best, advancing 4.1%. Small-caps were second best climbing 2.9% while Mid-caps lagged, up just 1%.
The market’s slid into Election Day, S&P 500 down nine consecutive days, did offer ample opportunity to “buy the dip.” Over the course of its nine-day slid, S&P 500 shed 3.1% while numerous individual stocks dropped even further. During this downdraft, IES Holdings (IESC) and Century Communities (CCS) were added to the Small-cap portfolio. IESC and CCS are now up 22% and 5.9% respectively.
When the slid ended, on the historically bullish day before Election Day, it rebounded and DJIA was up seven days in a row. This broad strength (outside of technology) resulted in significant gains for several positions within the portfolio. Sucampo Pharma (SCMP) was down 0.5% last update and as of yesterday’s close is now up 27.8%. Lydall Inc. (LDL) also surged from a gain of 38.9% to 70.4%. Bank stocks performed exceptionally well on prospects of a steeper yield curve and possible less regulation under a new administration. Ameris Bancorp (ABCB) and Western Alliance (WAL) are now showing gains of 22.3% and 23.3%.
Only Sabra Healthcare REIT (SBRA) and Corelogic Inc. (CLGX) are currently in the red. SBRA is interest rate sensitive and is being pressured by higher rates, but because it is healthcare, its downside is likely limited. CLGX appears to have gotten wrapped up in the Silicon Valley tech sell off that ensued following election results, but it has already begun to rebound with other technology shares.
Four trade ideas have run away and are being cancelled. AV Homes Inc (AVHI), Preferred Bank (PFBC), United Community Bank (UCBI) and Semiconductor MFG-ADR (SMI) trade ideas are all cancelled. AVHI, PFBC and UCBI all traded within a few cents of their respective buy limits sometime in October or early November, but never below and are now significantly above. We will not chase. 
Please refer to the updated portfolio table below for Current Advice about each specific position. Also note that many stop losses have been updated.
[Almanac Investor Stock Portfolio – November 16, 2016 Closes]
Disclosure Note: At press time, officers of the Hirsch Organization, or accounts they control held positions in ANET, BUSE, CCS, CLGX, IESC, MHO, PFBC, SBRA and SCMP.