Stock Portfolio Updates: Small- and Mid-Caps Lag
By: Christopher Mistal
September 09, 2021
September is the final month of the third quarter and historically it is essentially tied with August as worst month of the year. Since 1950, September is ranked last for DJIA, S&P 500, NASDAQ (since 1971) and Russell 1000 (since 1979). Small caps, measured by the Russell 2000, have fared slightly better, but historical average performance is still negative. Over the last 21 years, September has generally opened tepidly with mixed performance depending on index with Russell 2000 often rising the most through mid-month. However after mid-month, any gains have tended to fade quickly and turn into losses by month’s end. Sizable losses in 2001, 2002, 2008 and 2011 weigh heavily on average performance.
[Typical Seasonal September Chart]
As of today’s close, DJIA, S&P 500, NASDAQ, Russell 1000 and Russell 2000 are all in the red for September. Choppy performance so far this month is in line with historical trends for the first part of the month. Should the market continue to track historical patterns then a modest move higher lasting through mid-month could begin soon. However, as noted above, any mid-month rally is not expected to last long as the week after quarterly options expiration has a horrific record. 
Stock Portfolio Updates
Over the last four weeks since last update through yesterday’s close, S&P 500 climbed 1.6% higher while Russell 2000 advanced 0.5%. During the same time period the entire portfolio was basically flat, off 0.005%, excluding dividends and any fees. Small- and Mid-cap positions were weakest down 0.4% and 0.9% respectively. Large caps fared much better climbing 1.4% higher. Several defensive/dividend paying positions (all defensive shaded in light grey) were responsible for the bulk of large-cap gains.
Small-cap weakness was primarily the result of retreats by banking stocks. Atlantic Union Bankshares (AUB), WSFS Financial (WSFS), South State (SSB) and Customers Bancorp (CUBI) all declined. All four positions had and still have solid gains since being added to the portfolio. WSFS and CUBI had previously doubled in value. Their retreat is likely the result of recent Fed news and its impact on Treasury yields. Continue to Hold AUB, WSFS, SSB and CUBI.
Two bright spots in the Small-cap portfolio were MGP Ingredients (MGPI) and Lemaitre Vascular (LMAT). MGPI advanced 3.2% over the last four weeks through yesterday’s close while LMAT jumped 8.6%. Both positions are still below their respective highs reached back in June which suggests further upside is possible. MGPI and LMAT are on Hold.
Mid-cap stocks also struggled over the last few weeks. Stepan Co (SCL) and Werner Enterprises (WERN) were the only two stocks to advance. SCL remains one of only two positions in the red in the entire portfolio since addition but it did make a small amount of progress. WERN is a trucking company and not unlike many other areas of the economy it is experiencing some challenges from the labor market. Another hurdle is regulatory and involves temporary CDLs for which the company is seeking an exemption. The exemption would benefit the company and its new drivers. Recent strength could be an indication that the market does anticipate an exemption to be granted. 
Large caps continue to own the spotlight. Even though the majority of the portfolio is defensive and/or dividend yielding, it still managed to keep pace with the S&P 500. There are a few weak spots, most notably AT&T (T) and Verizon (VZ). We do not anticipate either company to double in the next year but we do see them both continuing to pay a dividend that is relatively much better than many other choices. T and VZ are on Hold.
All other positions in the portfolio are on Hold. Please see table below for specific stop losses and current advice for each position.
[Almanac Investor Stock Portfolio Table]