Stock Portfolio Updates: More Stimulus & New Highs for DJIA & S&P 500
By: Christopher Mistal
March 11, 2021
This March started off with solid across the board gains, but that reversal from late-February weakness was fleeting as the market then continued to decline for the next three trading days. As of today, DJIA, S&P 500, NASDAQ, Russell 1000 and 2000 are all positive for March. The small-cap Russell 2000 index is best, up 6.25%. Second best is DJIA, up 5.02%. NASDAQ continues to lag with a gain of just 1.56% so far. In the following chart March 2021 (dotted lines plotted on right vertical axis) is compared to the typical March seasonal pattern over the recent 21-year period, 2000-2020 (solid lines using left vertical axis).
[Typical March Seasonal]
This year’s zigs and zags have differed from the recent 21-year pattern modestly as strength was merely a single day this year compared to past gains typically lasting until around the third trading day. Some similarities are present. Weakness did follow strength and it appears mid-month strength arrived early this year. Historically the market has tended to fizzle after mid-month as monthly options expiration and end-of-Q1 pressures weigh on trading. It would not be surprising to see some weakness after mid-month this year especially given the magnitude of current gains compared to full-month historical average performance. New highs by DJIA, S&P 500 and Russell 2000 are encouraging, but NASDAQ is lagging. Without the support of tech, and new NASDAQ highs, the current rally could falter.
Portfolio Updates
Over the last four weeks since last update through yesterday’s close, S&P 500 dipped 0.3% lower while Russell 2000 inched 0.1% higher. During the same time period the entire portfolio climbed a modest 0.7% higher excluding dividends and any fees. Overall portfolio performance was held in check by a still sizable cash position and weakness in some defensive positions (shaded in grey). Our Small-cap stocks were responsible for all of the overall portfolio’s advance, gaining 2.3%. Mid-cap stocks dipped 2% lower on average while our Large-cap portfolio also lagged, declining 1.6%.
Large-cap weakness was primarily the result of declines by defensive utility positions. The utility sector has bounced but not before American Electric (AEP) and CMS Energy (CMS) were stopped out. Both AEP and CMS positions were added to just after last month’s update. As a result their respective Presented Prices have been adjusted for the new purchases prior to being stopped out. All other utility sector positions that were suggested buys last month did trade below their respective buy limits and existing position prices have been adjusted. Large-cap utility positions AEE, DTE, DUK, EXC and SO are all on Hold now. It does appear as though typical seasonal strength in utilities is beginning, but big new spending plans by the new administration could pressure treasury yields that could reignite selling in the sector.
Autodesk Inc (ADSK) was also stopped out of the Large-cap portfolio earlier this month. Until today ADSK was trading below the price it was stopped out. Broad tech strength today boosted shares, but it is still below its recent highs over $300 per share reached in mid-February. For now we will move on from ADSK.
Poor performance from the Mid-cap portfolio can be mainly traced to two stocks. Aerovironment (AVAV) and Jinko Solar (JKS). AVAV was briefly over $140 in late January, pulled back in early February and was back above $140 just before mid-February, but then rapidly retreated again to trade under $100 on March 5. As a result of its declines, AVAV was closed out of the portfolio on February 25 when it closed below its stop loss for a gain of 37.2% since last November. Other alternative energy stocks displayed a similar pattern over the same period. JKS was also closed out of the portfolio as it closed below its stop loss in February. Prior to being stopped out, it had traded below its buy limit and its position was expanded.
On a positive note, JetBlue Airways (JBLU) did help recover some of the Mid-cap portfolio’s declines. In accordance with standard trading guidelines, half the original position in JBLU was sold when its price doubled on February 19. As of yesterday’s close, JBLU was up 132.7%. Valmont Industries (VMI) also had a solid four weeks, now up over 56% since last November.
Small-caps have been on a tear since last November and even though the Russell 2000 was essentially flat, our small-caps continued their advance. WSFS Financial Corp (WSPS) became the third position to double in the portfolio and after selling half is still up 102.3%. Other financial positions also performed well with South State Corp (SSB) and Customers Bankcorp (CUBI) up 48.6% and 89.6% respectively since last November.
Please see table below for specific stop losses and current advice for each position in the portfolio. All other positions not already mentioned are on Hold.
[Almanac Investor Stock Portfolio Table]