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June 02, 2014

Another Month for Mid Cap and Value

There are no changes to the recommendations of Northlake’s models for June. The Market Cap model continues to recommend mid cap and the Style model still favors value. As a result of the latest signals, Northlake client investments in the S&P 400 Mid Cap (MDY) and the Russell 1000 Value (IWD) will be held for at least another month.

There was little underlying movement in the models. The only individual factor to changes was a shift toward growth for the insider buying indicator in the Style model. This is interesting given that growth stocks were pummeled in March and April. At least relative to management teams at value companies, it appears that insiders at growth companies saw their stock price declines as buying opportunities.

Overall, the Style model remains quite firmly in value territory with twice as many of its indicators favoring value as growth. The Market Cap model has slowly edged toward a large cap signal over last few months. Both models are reflecting the recent trends in the market and the mixed economic data over the first part of the year.

Recent performance of the models has been below average. During April, the mid cap signal was OK, gaining 169 basis points against a rise of just 79 basis points for small caps. However, large caps gained 210 points. Year to date, the Market cap model has gained just shy of 3% versus an increase of just over 4% for the S&P 500. The Style model gained 141 basis points last month, trailing both the S&P 500 and the growth index that gained 304 basis points. A good question is whether this represents a dead cat bounce for growth following the April and May shellacking. Year to date, the Style model has gained just over 2%.

MDY and IWD are widely held by clients of Northlake Capital Management, LLC, including in Steve Birenberg’s personal accounts. Steve is sole proprietor of Northlake, a registered investment advisor. Northlake’s regulatory filings can be found at www.sec.gov.

Posted by Steve Birenberg at June 2, 2014 09:34 AM in Models