The third quarter has mercifully come to an end. Ye shall not be missed. This was the worst quarter for Wall Street in four years. All told, the S&P 500 lost 6.94% in Q3.

But here’s an interesting fact: The market’s pain was overwhelmingly concentrated within a four-session span that ranged from August 20 to August 25. In fact, if we isolate just two of those days, Friday, August 21 and Monday, August 24, the S&P 500 lost 7.00%. In other words, outside those two successive days, the market was up by a teeny bit last quarter.

Naturally, you could say this is cherry-picking the data, and to some degree, that’s correct. But it highlights an important point I often

stress to investors—selloffs are quick and sharp, while recoveries are slow and steady. In fact, sell-offs are often mostly over at just about the time people are wondering if we’re in one.

That was certainly true this week. Billionaire Carl Icahn made headlines by saying that the stock market is in “dangerous territory.” (Icahn outlined his thoughts in a video entitled “Danger Ahead.”) Of course, his warning comes more than a month after the market’s August turbulence, and more than four months after the market’s May peak. Investing is the one area of human activity where people are unnerved by lower prices.

In this week’s CWS Market Review, we’ll take a closer look at our Buy List’s performance so far. The bad news is that we’re down for the year. The good news is that we’re not as down as much as everyone. Of course, being a bit less bad than everybody else will get you far on Wall Street. We also had a blow-out sales report from Ford Motor (F). The automaker just registered its best September in eleven years. I’ll also explain why the market’s recent “retest” was so unbalanced. But first, let’s see how well our Buy List has fared this year.

Three Quarters Down, and We’re Beating the Market

On Wednesday, September 30, the S&P 500 closed at 1,920.03. That gave the index a YTD loss of 6.74%. If you add in dividends, then the index was down 5.29%.

The 21 stocks on our Buy List finished the third quarter with a YTD loss of 2.22%. Once you include dividends, the loss was 1.37%, so we’re running about 4% ahead of the overall market. For tracking purposes, I assume the Buy List is a $1 million portfolio at the start of the year. The portfolio is divided equally among the 20 stocks, so we start with $50,000 in each position. The Buy List now includes 21 stocks as a result of eBay’s spinning off PayPal.

As always, the rules of the Buy List forbid me from making any changes during the year. Each December, I’ll announce our portfolio changes. We’ll have five new buys and five sells (this December, there will be six sells due to PayPal). After that, the Buy List is locked and sealed for the next 12 months.

We had a nice run of beating the S&P 500 for seven years in a row until we lost to the market last year. (It was close: 13.69% to 11.80%.) Fortunately, we’re back to our market-beating ways in 2015.

This is the tenth year for the Buy List. If you were to group all 9.75 years together, then our Buy List has gained 147.84% to the S&P 500’s 89.10%. Basically, we turned every $2 into $5. Bear in mind, we did this with very little trading.

(Side note: When I give the performance of the long-term Buy List, I calculate it by assuming annual rebalancing. I realize that very few investors do this, nor is it necessary. But I believe it’s the fairest way to state our long-term results.)

At the end of three quarters, our best-performing stock is Fiserv (FISV), with a 22% gain. This quiet stock just goes up and up. In second place is one of our new additions this year, Hormel Foods (HRL), with a 21.5% gain. The Spam company has held up quite well recently. That’s what I like about consumer staples. When times get rough, people cut back on luxuries, but not on things like Dinty Moore (yep, a Hormel brand).

The also-rans of this year’s Buy List are dominated by four underachievers: Oracle (ORCL), Qualcomm (QCOM), Bed Bath & Beyond (BBBY) and Moog (MOG-A). Oracle was down 19.7% at the end of Q3, while the other three were all down by more than 25%.

This highlights another important fact of investing. Your worst positions will often be down more than your best positions are up. Not always, but it’s true often enough. Remarkably, 15 of our 21 stocks have outperformed the market this year. The problem is that the duds really weigh down our performance. That’s why diversification is so important. Investors should always make sure their portfolios are broadly diversified. Now let’s turn to one of our more frustrating stocks, but one I still like.

Ford’s Best September in Eleven Years

Beleaguered Ford Motors (F) finally got some good news this week. Ford reported sales growth of 23% last month. That’s a very good number. Wall Street had been expecting 19%. With interest rates low and gas prices down, buying and driving a new car isn’t much of an obstacle for many Americans.

Sales of Ford’s F-Series pickups were up 16%, and their SUV’s did especially well. Commercial-van sales were up 86%. This was their best month in 29 years. These numbers suggest that Ford closed Q3 on a strong note. The automaker had a very good report for Q2, beating the Street by 10 cents per share, but that hasn’t helped the stock.

Shares of Ford have been rocked back and forth ever since the market broke down in late August. The stock briefly dripped below $13 per share before rallying to nearly $15 two weeks ago. It dropped back again to $13 per share earlier this week. There’s also the looming threat of a strike at an F-150 plant in Kansas City. Don’t worry. I’m inclined to believe some agreement will be reached before Sunday’s deadline.

I still like Ford a lot, and I’m surprised the shares are so low. The company has stood by its earnings forecast all year, and the dividend is sound. Ford remains an attractive buy up to $15 per share.

Wait till the VIX Hits 20

A few weeks ago, I told you that the coast will be clear once the Volatility Index (^VIX) closes below 20. Since then, the VIX has come close a few times, but hasn’t yet closed below that target. We can use that as a rough indicator for the market’s state of mind.

In last week’s CWS Market Review, I wrote, “I wouldn’t be surprised if the S&P 500 tries to ‘retest’ its low of 1,870.” That’s exactly what happened. This past Tuesday, the S&P 500 dropped down to an intra-day low of 1,871.9, which is less than five points above the intra-day low from August 24.

Technical analysts pay attention to when the market goes back to “test” its previous low points. The theory goes that if the test fails, then you can expect the downtrend to continue. But if the old low holds, then that bodes well for the start of a new uptrend. So far, the old low has held. (So far.)

What’s interesting about this retest is how unbalanced it is. Let me explain. When the market gets nervous, investors run for cover in more stable stocks, and that generally means large-caps. As a result, the mammoth-cap stocks have not been the ones resetting their lows. Rather, it’s been the little guys. They’ve not only been testing the lows, the lows have been falling left and right. The small-cap Russell 2000 recently fell for eight days in a row.

Bloomberg notes that 42% of the stocks in the S&P 500 have slipped below their August 25 low. In fact, if we look at three Mongo-caps, ExxonMobil (XOM), Microsoft (MSFT) and Apple (AAPL), they’ve combined for nearly 20% of the index’s gain since the recent low. The S&P 500 Equal Weighted Index has already made a new low. In other words, for most stocks, the market’s correction is still going strong.

Is this a sign of more bad times to come? Will the big-caps finally give in? I can’t say for sure, but the good news is that we don’t need to worry about timing the market to do well. Instead, our strategy is to focus on strong companies that are going for good prices.

Some of the stocks I like right now on our Buy List are AFLAC (AFL), The selling at Moog (MOG-A) has gotten to be a bit much. The stock is especially attractive below $55 per share. Again, I like Ford Motor (F). If you can get it below $14, you got a good deal. Now let’s look at some other Buy List stocks.

Buy List Updates

If you recall, Ball Corp. (BLL), one of our Buy List stocks, wants to take over Rexam. The problem is that the anti-trust authorities in Europe aren’t too wild about the idea. I can’t say that’s entirely surprising, since the companies are the #1 and #2 can-makers.

This week, the EU formally raised its objections to the deal. That’s actually good news, because now Ball has something concrete to work with. They can alter the deal to meet the approval of regulators. Most likely, this means Ball will have to sell off some assets. Ball and Rexam have a deadline of December 9 to respond to the EU’s objections. Ball sounds very confident that the merger will eventually be approved. This will be a good deal for Ball.

I also want to lower my Buy Below prices for two of our stocks. The selling pressure has been rough this last month, and I want our Buy Below prices to reflect that. I’m lowering PayPal’s (PYPL) Buy Below to $34 per share. I’m also lowering Wabtec’s (WAB) to $95 per share. Last week, I said I especially like Wabtec when it’s below $90 per share.

Finally, let me note that Bank of America Merrill Lynch just upgraded Microsoft (MSFT) from underperform to neutral. They raised its target price from $39 to $47 per share. This stock is going for a good price.

That’s all for now. The big September jobs report is due out later today. Earnings season kicks off next week, when Alcoa reports Q3 earnings on Thursday. None of Buy List stocks report next week, but Wells Fargo (WFC) will be our first stock to report the following Wednesday, October 14. Seventeen of our stocks will report over the following three weeks. Also next week, the Fed will release the minutes of their last meeting. This was the controversial “no go” meeting. It will be interesting to hear what was discussed. Be sure to keep checking the blog for daily updates. I’ll have more market analysis for you in the next issue of CWS Market Review!

– Eddy