While the S&P 500 Index cranked out a 3.7% gain during the month of February, the thirteen positions we had open for all or part of the month produced an average net gain of only 0.24%.  

Obviously I’m disappointed in our performance last month, but not entirely surprised since our Rapid Profits Matrix works best when the stock market is trading on conventional metrics. However, until the Trump administration clarifies precisely how it is going to accomplish many of its major policy initiatives investors will continue to react to the daily deluge of taunting tweets, confusing press conferences and contradictory statements that make it difficult to calculate fair value for most companies.

Of course, this isn’t the first time the stock market has gone off-script for us, and it won’t be the last time, either. Only a year ago the S&P 500 Index suffered a quick 10% correction after oil prices threatened to collapse, but just a few months later it was back in positive territory for the year. This year virtually the mirror image has occurred, at least thus far.

In this case I don’t expect the stock market to give back all of its recent gains in the months to come, but I do believe investors will become more discriminating as the fantasy of easy growth gives way to the reality of difficult choices. When that happens, most likely later this month when Congress begins the difficult task of converting Trump’s wish list into legislation, I expect our model will resume its historical rate of success. 

With respect to our portfolio, we closed out three positions in February – Gilead Sciences, Cardinal Health and USANA Health Sciences – and opened three new positions in their place – Cato Corp., Carbonite and Jones Energy. I also opened a new position in AEIS and closed out our holding in DHI for a big gain on March 2, leaving our portfolio with nine open positions that are summarized on the following pages.

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