February is historically no stranger to market volatility. This year the market has been taking shots from AI concerns ranging from its cost to develop to the fear it could steal business from existing companies or displace numerous humans from the labor force. Some of the selling does look overdone as many of AI’s concerns are still rather speculative. Mass layoffs have yet to appear and spending plans are just that, plans that could change. There is little doubt AI will have a major and significant impact on the economy, but like many of the technological advances of the past, AI is likely to also create vast new opportunities. When conversation and discussion finally turn away from fear and loss to the new opportunities, we suspect many of the names getting hit today will be thriving again.
Volatility has returned after its brief hiatus, but thus far February’s lows have held, and the current pullback looks like a retest. As of today’s close, February 12, DJIA and Russell 2000 are still positive this month, up 1.1% and 0.08% respectively. S&P 500, NASDAQ and Russell 1000 are in the red. Compared to the patterns of past midterm year Februarys this year is not far off course. The magnitude of this year’s moves has been larger compared to the averages but there are similarities in the trend. DJIA and Russell 2000 are leading while the rest are lagging. Provided last week’s low closes hold, the major indexes could begin to choppily trade higher through the end of the month. Typical, longer-term Presidents’ Day weakness could delay a rebound while DJIA’s December 1, 2025, closing low of 47289.33 remains a line in the sand (page 36 STA 2026). At today’s close of 49451.98 DJIA stands 4.6% above its December closing low.
Free Lunch Stocks – That’s A Wrap
This year’s go around with
Free Lunch stocks was at best another mixed bag despite a solid year-to-date performance by many small-cap stocks and indexes. As of the market’s close yesterday, February 11, just 7 of the original 21 stocks remained. Of these 7 stocks, 6 were positive and one was modestly negative. Collectively, the 7 remaining stocks were up 10.4% on average. However, when the other 14 stocks that were previously stopped out, are considered overall average performance for the entire basket slips to just 0.7%.
The best performing position in the basket was National Storage Affiliates Trust (NSA), up 19.5%. Second place honors go to EOG Resources (EOG) with a 15.5% gain. Lamb Weston Holdings (LW) rounds out the top three with a 15.4% gain. The suggested 8% trailing stop using daily closing prices appears to have worked reasonably well with just a few whip-saw events while still providing some protection from larger drops like what occurred with Doximity (DOCS). DOCS was nearly cut in half since December.
Now that mid-February has arrived, it is time to close out the remaining Free Lunch stock positions. Sell AMT, ESRT, EOG, LW, NSA, NXRT, and TU. For tracking purposes, they will be closed out of the Almanac Investor Stock Portfolio using their respective average prices on February 13, 2026.
Stock Portfolio Updates
Over the past four weeks, through the close on February 11, the Almanac Investor Stock Portfolio climbed 2.0% higher, excluding dividends and any potential interest generated by the cash position, compared to just a 0.2% advance by S&P 500 and a 0.7% gain by Russell 2000. Across the portfolio, mid-cap positions were best on average, advancing 9.2%. Small- and large-cap positions also contributed with smaller average gains. Overall portfolio gains were held in check by a sizable cash balance. This growth in cash is the result of closing some Free Lunch stocks, the closure of stopped-out positions, and from taking profits when a stock position first doubles. The cash balance is not a targeted allocation percentage.
HealWell AI (HWAIF) remains on Hold. This was and still is a highly speculative trade in a sector/industry that continues to struggle. Having its primary listing outside of the U.S. has not been helpful either. HWAIF’s overall performance is disappointing but there have been some potentially encouraging signs recently. HWAIF did post a gain today during a sea of red. We await their next quarterly earnings release later this quarter.
Encompass Health (EHC) was stopped out of the portfolio on January 20 when it closed below its stop loss at $99.55. This was also disappointing as EHC did beat when it released earnings on February 5 and it did jump higher. However, it does remain to be seen if the current move higher will persist. As of today, positive momentum appears to be fading, and EHC is still below its intra-day high from February 6.
In the last Stock Portfolio update we noted improvements in Jones Lang LaSalle (JLL) and CBRE Group (CBRE). Unfortunately, AI takeover fears have now spread into real estate stocks. The magnitude of the sell-off does seem excessive, especially considering it is still largely hypothetical. Plus, CBRE just released earnings for its strong Q4. Revenues reached a record high while revenue growth was 12% and earnings per share grew 18%. CBRE’s guidance was solid as well.
Nonetheless, CBRE and JLL did close below their stop losses today. Both will be closed out of the portfolio on February 13 and will appear in the next portfolio update. Is the AI-takeover rout over in real estate? Probably not just yet but a significant amount of damage has been done and valuations are being reset.
On a brighter note, OSI Systems (OSIS) did trade at new all-time highs in January and above twice its original purchase price. As a result, half of the position was sold on January 21. OSIS has since retreated modestly but its uptrend does still appear to be intact. OSIS is on Hold.
Archrock (AROC) also deserves some attention. It is essentially a small-cap energy sector stock with a current market capitalization of approximately $5.5 billion. As of today’s close, it is up 22.9% year-to-date and 29.4% since addition to the portfolio. Energy is one sector that has remained firm bucking AI-takeover fears and broader tech troubles. AROC can be considered on dips below $31.55.
Right alongside AROC in the table below, StoneX Group (SNEX) has also been on a tear, closing at a new all-time high yesterday and trading to a new intra-day high today before pulling back. SNEX can be considered on dips below $119.35.
Please see the table below for most recent advice. Note some stop losses and buy limits have been updated to account for recent market moves.
Disclosure note: Officers of Hirsch Holdings Inc. held positions in APH, AROC, BOOT, CBRE, COLL, , ENSG, HWAIF, JLL, PAHC, RMBS, SMCI, and SNEX in personal accounts.