The Aleph Blog » Blog Archive » Lonely Puppies, or Abandoned Mutts

Lonely Puppies, or Abandoned Mutts

I have often owned companies with little to no sell-side analyst coverage.  Ask yourself this, how many companies trading on US exchanges are there:

  • That have no analyst coverage
  • That are US-based
  • That have a Market Cap over $250 million
  • That aren’t passthrough vehicles
  • And have pitiful liquidity at least

I made the following list by using a Media General database, and cross-checking it with Yahoo Finance.  Yeah, I live on the cheap.  Here we go:

CompanyIndustryTickerMarket Cap $M
Terra Nitrogen Company, L.P.0103 – Chemical ManufacturingTNH            4,235
Icahn Enterprises, L.P.0963 – Retail (Specialty Non-Apparel)IEP            4,065
Valhi, Inc.0103 – Chemical ManufacturingVHI            3,856
Seaboard Corporation0515 – Food ProcessingSEB            2,619
EQT Midstream Partners LP1206 – Natural Gas UtilitiesEQM                908
Contango Oil & Gas Company0609 – Oil & Gas OperationsMCF                901
Nortek Inc0406 – Appliances & ToolsNTK                797
Sabine Royalty Trust0609 – Oil & Gas OperationsSBR                781
Dorchester Minerals LP0609 – Oil & Gas OperationsDMLP                695
Rouse Properties Inc0933 – Real Estate OperationsRSE                681
Star Scientific, Inc.0524 – TobaccoCIGX                590
NL Industries, Inc.0103 – Chemical ManufacturingNL                578
1st Source Corporation0727 – Regional BanksSRCE                547
Apco Oil & Gas International I0609 – Oil & Gas OperationsAPAGF                546
CorVel Corporation0806 – Healthcare FacilitiesCRVL                518
National Western Life Insuranc0709 – Insurance (Life)NWLI                513
Village Super Market, Inc.0957 – Retail (Grocery)VLGEA                468
Atrion Corporation0812 – Medical Equipment & SuppliesATRI                416
Presidential Life Corp0709 – Insurance (Life)PLFE                411
PHI Inc.0612 – Oil Well Services & EquipmentPHII                409
Seneca Foods Corp0515 – Food ProcessingSENEA                324
Lifevantage Corporation0809 – Major DrugsLFVN                306
Preformed Line Products Compan0127 – Misc. Fabricated ProductsPLPC                300
Westwood Holdings Group, Inc.0718 – Investment ServicesWHG                294
Ladenburg Thalmann Financial S0718 – Investment ServicesLTS                287
Camden National Corporation0727 – Regional BanksCAC                281
Federal National Mortgage Asso0703 – Consumer Financial ServicesFNMA                278
Fisher Communications, Inc.0906 – Broadcasting & Cable TVFSCI                278
Pendrell Corp0718 – Investment ServicesPCO                277
U.S. Lime & Minerals Inc.0212 – Construction – Raw MaterialsUSLM                271
Winmark Corporation0963 – Retail (Specialty Non-Apparel)WINA                264
Arden Group, Inc.0957 – Retail (Grocery)ARDNA                263
Clifton Savings Bancorp, Inc.0727 – Regional BanksCSBK                262

Not so surprising, there are:

  • A lot of limited partnerships and royalty trusts.
  • Many financial firms.
  • Many companies where there is a controlling shareholder, and liquidity is scarce relative to size.

All that said, this is an area of the market where few tread, and there may be some values to be had.

Now, there were some companies that were far less liquid, and with less disclosure,  that fit the above criteria, and I list them here.

Extremely Limited Liquidity

CompanyIndustryTickerMarket Cap $M
Belk Inc0951 – Retail (Department & Discount)BLKIA            1,839
SunGame Corporation1036 – Software & ProgrammingSGMZ                746
First National Bank Alaska0727 – Regional BanksFBAK                555
Computer Services, Inc.1036 – Software & ProgrammingCSVI                463
First Citizens Bancorporation,0727 – Regional BanksFCBN                410
TherapeuticsMD Inc0921 – Motion PicturesTXMD                311
Hills Bancorporation0727 – Regional BanksHBIA                304
Farmers & Merchants Bancorp0727 – Regional BanksFMCB                284

Some of these look promising as longs, if you can get shares. Others look promising as shorts, if you can get a borrow.  Remember that the illiquid end of the market is the place where promoters play, creating their own internal version of the “bucket shop,” getting people to buy in at higher valuations, while they sell out for a profit.

These are companies where personal research can pay off, because few others are analyzing them.  I own one of them, and it is:

Full Disclosure: long NWLI






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2 Responses to Lonely Puppies, or Abandoned Mutts

  1. cig says:

    It may be interesting to look at companies that only have 1 analyst whom they hired to “cover” them, as this is really almost the same thing as “no analysts” and it will expand the universe. It’s a common practice I’m told.

  2. I will do another analysis, on one analyst; should be interesting.

Disclaimer


David Merkel is an investment professional, and like every investment professional, he makes mistakes. David encourages you to do your own independent "due diligence" on any idea that he talks about, because he could be wrong. Nothing written here, at RealMoney, Wall Street All-Stars, or anywhere else David may write is an invitation to buy or sell any particular security; at most, David is handing out educated guesses as to what the markets may do. David is fond of saying, "The markets always find a new way to make a fool out of you," and so he encourages caution in investing. Risk control wins the game in the long run, not bold moves. Even the best strategies of the past fail, sometimes spectacularly, when you least expect it. David is not immune to that, so please understand that any past success of his will be probably be followed by failures.


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