A Different Look at Neglect

It’s good to look at stocks that not everyone else is looking at.  A little neglect can be a good thing.

  • Companies that are a little illiquid.
  • Companies with a dedicated shareholder base; they don’t sell at the drop of a hat.
  • Companies with control investors that don’t give outside passive minority investors the short end of the stick.
  • Companies that have odd business models that have most investors ignore them
  • Companies in boring businesses.

Let’s look at this top down, looking at neglect by market sector.  Days to turn over indicates how rapidly stocks are traded.  A high number means they trade more slowly.

SectorMarket Cap ($M)Dollar Volume ($K)Days to turn over
05 – Consumer Non-Cyclical1,536,8077,274,592211
07 – Financial3,511,04116,767,713209
12 – Utilities1,051,8115,348,267197
06 – Energy2,425,78714,781,550164
02 – Capital Goods1,253,3617,882,012159
08 – Health Care2,428,96916,080,916151
Grand Total23,817,027161,861,109147
01 – Basic Materials947,8306,770,631140
11 – Transportation594,9894,279,380139
03 – Conglomerates15,805116,462136
09 – Services4,936,83537,308,869132
10 – Technology4,368,57538,382,921114
04 – Consumer Cyclical745,2176,867,798109

In general, colder sectors attract more long-term holders.  Sectors where competitive conditions change more rapidly turn over faster.

An aside before we go on — I excluded from this analysis:

  • Foreign stocks trading on US exchanges
  • Over the counter stocks
  • Stocks with less than $10 million in market cap
  • Exchange traded products

That left me with around 3900 stocks.  As an aside, stock turnover seems have to increased, and I wonder if high frequency trading and ETP creation/liquidation might be driving that.  147 days for an average holding period means stocks trade their entire market capitalization  around 2.5x per year.  Cue up the commentary from Buffett and Munger about how most trading in the stock market is wasted effort.

But now let’s look at industries:

IndustryMarket Cap ($M)Dollar Volume ($K)Days to turn over
0715 – Insurance (Property & Casualty)632,4491,730,968365
0112 – Fabricated Plastic & Rubber3,29810,484315
1206 – Natural Gas Utilities435,1061,407,846309
0506 – Beverages (Non-Alcoholic)354,7101,217,841291
1103 – Air Courier139,858505,601277
0521 – Personal & Household Products434,0081,574,389276
1209 – Water Utilities17,10364,198266
0724 – Money Center Banks223,336877,033255
0524 – Tobacco272,3851,170,334233
0606 – Oil & Gas – Integrated438,1811,900,557231
0957 – Retail (Grocery)398,9811,740,963229
0712 – Insurance (Miscellaneous)51,749227,575227
0218 – Misc. Capital Goods417,8911,859,649225
0975 – Waste Management Services59,927283,562211
0730 – S&Ls/Savings Banks1,8879,013209
1112 – Railroads186,397902,219207
0809 – Major Drugs227,4191,135,147200
0915 – Communications Services692,3733,519,894197
0503 – Beverages (Alcoholic)52,692273,645193
0727 – Regional Banks1,227,8136,422,106191
1030 – Scientific & Technical Instruments265,5951,393,898191
0706 – Insurance (Accident & Health)247,6221,310,785189
0718 – Investment Services554,2252,934,362189
0418 – Footwear80,706428,470188
0512 – Fish/Livestock1,91710,383185
0703 – Consumer Financial Services405,6972,203,610184
0203 – Aerospace and Defense402,2232,254,100178
0960 – Retail (Home Improvement)169,283956,876177
0127 – Misc. Fabricated Products77,222439,594176
0221 – Mobile Homes & RVs5,29731,414169
0612 – Oil Well Services & Equipment574,2923,407,144169
0106 – Chemicals – Plastics and Rubbers173,0531,038,370167
0954 – Retail (Drugs)230,4951,417,370163
1109 – Misc. Transportation73,963456,181162
0103 – Chemical Manufacturing353,3602,227,847159
0709 – Insurance (Life)166,2631,052,261158
0803 – Biotechnology & Drugs1,613,67510,424,895155
1203 – Electric Utilities599,6033,876,223155
0415 – Auto & Truck Parts203,5961,324,773154
0509 – Crops4,88931,874153
0918 – Hotels & Motels94,044616,953152
0609 – Oil & Gas Operations1,386,1759,141,482152
0209 – Construction – Supplies and Fixtures140,270934,529150
1006 – Computer Hardware72,374487,123149
1036 – Software & Programming1,152,9447,816,781147
Grand Total23,817,027161,861,109147
0921 – Motion Pictures159,5681,105,864144
1024 – Electronic Instruments & Controls182,5691,279,912143
0515 – Food Processing403,5982,854,143141
0909 – Business Services446,0843,157,933141
0812 – Medical Equipment & Supplies436,7333,130,033140
0930 – Printing Services7,17051,557139
0109 – Containters & Packaging81,869590,633139
0933 – Real Estate Operations594,2864,295,888138
0206 – Construction & Agricultural Machinery137,131991,809138
0303 – Conglomerates15,805116,462136
0969 – Schools21,108160,274132
1115 – Trucking44,104336,398131
0939 – Rental & Leasing238,5641,828,936130
0130 – Non-Metallic Mining4,78937,031129
0942 – Restaurants219,6611,709,208129
1118 – Water Transportation32,241255,920126
0406 – Appliances & Tools55,182456,389121
0927 – Printing & Publishing91,943760,613121
0133 – Paper & Paper Products30,855256,597120
0936 – Recreational Activities75,698643,463118
0124 – Metal Mining98,839864,894114
0430 – Recreational Products54,015474,019114
0421 – Furniture & Fixtures31,741279,508114
0948 – Retail (Catalog & Mail Order)266,9042,421,091110
0806 – Healthcare Facilities151,1421,390,841109
0121 – Iron & Steel76,186704,432108
0924 – Personal Services41,546386,447108
0403 – Apparel/Accessories89,378848,477105
1018 – Computer Services1,023,2389,989,880102
1003 – Communications Equipment837,8018,227,385102
0972 – Security Systems & Services8,89288,979100
1021 – Computer Storage Devices124,1361,290,69696
0963 – Retail (Specialty Non-Apparel)216,2232,271,38695
0945 – Retail (Apparel)160,3901,696,87995
0906 – Broadcasting & Cable TV471,3875,029,75894
0433 – Textiles – Non-Apparel11,455123,78993
1033 – Semiconductors670,9807,309,56392
0951 – Retail (Department & Discount)102,8491,133,64091
1012 – Computer Networks14,378159,28890
0903 – Advertising39,473442,18089
0409 – Audio & Video Equipment11,660130,67689
0518 – Office Supplies12,608141,98189
0215 – Construction Services119,7821,361,92288
0912 – Casinos & Gaming109,7031,259,52087
0424 – Jewelry & Silverware6,52778,56883
0603 – Coal27,139332,36682
0118 – Gold & Silver20,871256,84281
0115 – Forestry & Wood Products27,489343,90780
1027 – Office Equipment4,01051,06479
0412 – Auto & Truck Manufacturers189,0922,548,45474
0436 – Tires8,943126,83871
0212 – Construction – Raw Materials30,768448,58969
1106 – Airline118,4261,823,06165
0966 – Retail (Technology)20,283329,63762
0427 – Photography2,92347,83761
1015 – Computer Peripherals20,549377,33054

Again, the pattern is more volatile and controversial industries trade more frequently than the more stable industries.  One one sense, this is obvious, because the stock market can be used for two purposes — investing and gambling.  Gambling is much more attractive when prices are volatile, and the prospects for making a big win are significant. (Even if the possibility of big losses is high as well.  Oh well, profits tend to flow to those  who eliminate the downside.)

Finally, let’s look at individual stocks, segmented by market capitalization.

Behemoth Stocks

CompanyTickerSectorIndustryDays
Berkshire Hathaway Inc.BRK.A07 – Financial0715 – Insurance (Property & Casualty)6,579
Wal-Mart Stores, Inc.WMT09 – Services0957 – Retail (Grocery)542
Exxon Mobil CorporationXOM06 – Energy0609 – Oil & Gas Operations453
Johnson & JohnsonJNJ08 – Health Care0803 – Biotechnology & Drugs427
PepsiCo, Inc.PEP05 – Consumer Non-Cyclical0506 – Beverages (Non-Alcoholic)365
Procter & Gamble Company, ThePG05 – Consumer Non-Cyclical0521 – Personal & Household Products362
General Electric CompanyGE02 – Capital Goods0218 – Misc. Capital Goods353
Wells Fargo & CoWFC07 – Financial0727 – Regional Banks345
Coca-Cola Company, TheKO05 – Consumer Non-Cyclical0506 – Beverages (Non-Alcoholic)341
Chevron CorporationCVX06 – Energy0606 – Oil & Gas – Integrated339
     
Comcast CorporationCMCSA09 – Services0915 – Communications Services196
QUALCOMM, Inc.QCOM10 – Technology1033 – Semiconductors193
Citigroup IncC07 – Financial0727 – Regional Banks175
Cisco Systems, Inc.CSCO10 – Technology1003 – Communications Equipment161
Intel CorporationINTC10 – Technology1033 – Semiconductors146
Bank of America CorpBAC07 – Financial0727 – Regional Banks138
Gilead Sciences, Inc.GILD08 – Health Care0803 – Biotechnology & Drugs123
Amazon.com, Inc.AMZN09 – Services0948 – Retail (Catalog & Mail Order)105
Apple Inc.AAPL10 – Technology1003 – Communications Equipment93
Facebook IncFB10 – Technology1018 – Computer Services50

The table above lists the biggest stocks — the top ten that are less traded, and the top ten that are most traded.  No surprises, those that are most traded are more controversial than those that are traded less.  Also, some companies have investors with control positions, which further slows down trading as most control investors rarely trade.

Large Cap Stocks

CompanyTickerSectorIndustryDays
Cheniere Energy Partners LP HoCQH12 – Utilities1206 – Natural Gas Utilities1,709
CNA Financial CorpCNA07 – Financial0715 – Insurance (Property & Casualty)1,647
Icahn Enterprises LPIEP09 – Services0963 – Retail (Specialty Non-Apparel)1,355
Spectra Energy Partners, LPSEP12 – Utilities1206 – Natural Gas Utilities1,190
Enable Midstream Partners LPENBL06 – Energy0606 – Oil & Gas – Integrated1,166
Cheniere Energy Partners LPCQP12 – Utilities1206 – Natural Gas Utilities1,041
Thomson Reuters Corporation (UTRI09 – Services0927 – Printing & Publishing1,012
Western Gas Equity Partners LPWGP06 – Energy0609 – Oil & Gas Operations969
Enterprise Products Partners LEPD12 – Utilities1206 – Natural Gas Utilities956
Plains GP Holdings LPPAGP06 – Energy0612 – Oil Well Services & Equipment953
     
Citrix Systems, Inc.CTXS10 – Technology1036 – Software & Programming54
United Continental Holdings InUAL11 – Transportation1106 – Airline53
LinkedIn CorpLNKD10 – Technology1018 – Computer Services47
Yahoo! Inc.YHOO10 – Technology1018 – Computer Services47
Whole Foods Market, Inc.WFM09 – Services0957 – Retail (Grocery)45
Micron Technology, Inc.MU10 – Technology1033 – Semiconductors39
CBS CorporationCBS09 – Services0906 – Broadcasting & Cable TV37
Tesla Motors IncTSLA04 – Consumer Cyclical0412 – Auto & Truck Manufacturers21
Netflix, Inc.NFLX09 – Services0906 – Broadcasting & Cable TV19
Twitter IncTWTR10 – Technology1018 – Computer Services19

What fascinates me here about the low turnover stocks is the dominance of energy limited partnerships.  Since they are income vehicles, they don’t trade as much stocks used for speculative gains.

Mid-cap Stocks

CompanyTickerSectorIndustryDays
CIM Commercial Trust CorpCMCT09 – Services0939 – Rental & Leasing9,382
Crown Media Holdings, IncCRWN09 – Services0906 – Broadcasting & Cable TV4,333
Clear Channel Outdoor HoldingsCCO09 – Services0903 – Advertising2,258
American National Insurance CoANAT07 – Financial0715 – Insurance (Property & Casualty)1,756
Gamco Investors IncGBL07 – Financial0718 – Investment Services1,627
Valhi, Inc.VHI01 – Basic Materials0103 – Chemical Manufacturing1,385
OCI Partners LPOCIP01 – Basic Materials0103 – Chemical Manufacturing1,205
Summit Midstream Partners LPSMLP12 – Utilities1206 – Natural Gas Utilities1,199
TFS Financial CorporationTFSL07 – Financial0727 – Regional Banks1,193
Global Partners LPGLP06 – Energy0609 – Oil & Gas Operations1,131
     
FireEye IncFEYE10 – Technology1036 – Software & Programming21
AK Steel Holding CorporationAKS01 – Basic Materials0121 – Iron & Steel21
Ariad Pharmaceuticals, Inc.ARIA08 – Health Care0803 – Biotechnology & Drugs21
Zillow IncZ09 – Services0933 – Real Estate Operations20
Trulia IncTRLA09 – Services0909 – Business Services20
Sunedison IncSUNE10 – Technology1033 – Semiconductors19
J C Penney Company IncJCP09 – Services0951 – Retail (Department & Discount)17
SolarCity CorpSCTY10 – Technology1033 – Semiconductors17
GT Advanced Technologies IncGTAT10 – Technology1033 – Semiconductors15
Yelp IncYELP09 – Services0927 – Printing & Publishing12

Again. hot stocks with uncertain returns at the bottom, and stocks with more certain prospects at the top.   Note the income vehicles in the less traded stocks.

Small Cap Stocks

CompanyTickerSectorIndustryDays
PHI Inc.PHII06 – Energy0612 – Oil Well Services & Equipment13,434
First Mid-Illinois Bancshares,FMBH07 – Financial0727 – Regional Banks10,674
QAD Inc.QADB10 – Technology1036 – Software & Programming8,529
Intermountain Community BancorIMCB07 – Financial0727 – Regional Banks8,374
Greene County BancorpGCBC07 – Financial0727 – Regional Banks7,021
Oconee Federal FinancialOFED07 – Financial0727 – Regional Banks6,143
Bel Fuse, Inc.BELFA10 – Technology1024 – Electronic Instruments & Controls5,131
PrimeEnergy CorporationPNRG06 – Energy0609 – Oil & Gas Operations4,303
Community Financial CorpTCFC07 – Financial0727 – Regional Banks3,608
Transcontinental Realty InvestTCI09 – Services0933 – Real Estate Operations3,168
     
PowerSecure International, IncPOWR12 – Utilities1203 – Electric Utilities20
Penn Virginia CorporationPVA06 – Energy0609 – Oil & Gas Operations20
Pixelworks, Inc.PXLW10 – Technology1033 – Semiconductors20
IsoRay, Inc.ISR08 – Health Care0812 – Medical Equipment & Supplies18
Quantum Fuel Systems Tech WorlQTWW04 – Consumer Cyclical0415 – Auto & Truck Parts17
Pacific Ethanol IncPEIX01 – Basic Materials0103 – Chemical Manufacturing17
Glu Mobile Inc.GLUU10 – Technology1036 – Software & Programming15
Achillion Pharmaceuticals, IncACHN08 – Health Care0809 – Major Drugs14
Walter Energy, Inc.WLT06 – Energy0603 – Coal14
Plug Power IncPLUG10 – Technology1024 – Electronic Instruments & Controls8

Look at all of the regional banks amid those that turn over less.  Look at all of the controversial stocks amid  those that trade frequently.

Microcap Stocks

CompanyTickerSectorIndustryDays
Bridgford Foods CorporationBRID05 – Consumer Non-Cyclical0515 – Food Processing20,286
Magyar Bancorp, Inc.MGYR07 – Financial0727 – Regional Banks8,948
Bowl America IncorporatedBWL.A09 – Services0936 – Recreational Activities8,599
MSB Financial Corp.MSBF07 – Financial0727 – Regional Banks5,562
Siebert Financial Corp.SIEB07 – Financial0718 – Investment Services5,136
Pathfinder Bancorp, Inc.PBHC07 – Financial0727 – Regional Banks4,764
Jacksonville Bancorp IncJXSB07 – Financial0727 – Regional Banks4,567
Oak Valley Bancorp(NDA)OVLY07 – Financial0727 – Regional Banks4,363
Howard Bancorp IncHBMD07 – Financial0727 – Regional Banks4,308
Bay Bancorp IncBYBK07 – Financial0727 – Regional Banks4,240
     
Hyperdynamics CorporationHDY06 – Energy0609 – Oil & Gas Operations16
InterCloud Systems IncICLD09 – Services0909 – Business Services14
BioFuel Energy Corp.BIOF01 – Basic Materials0103 – Chemical Manufacturing10
India Globalization Capital, IIGC02 – Capital Goods0215 – Construction Services8
LiveDeal IncLIVE10 – Technology1018 – Computer Services8
Giga-tronics, IncorporatedGIGA10 – Technology1024 – Electronic Instruments & Controls7
Digital Ally, Inc.DGLY04 – Consumer Cyclical0409 – Audio & Video Equipment5
DARA Biosciences IncDARA08 – Health Care0803 – Biotechnology & Drugs4
Spherix IncSPEX09 – Services0909 – Business Services4
USEC Inc.USU12 – Utilities1203 – Electric Utilities3

Look at all of the bitty banks that don’t get traded.  Perfect for some of my friends who buy and hold such banks, if they can get the trade on.  And then, look at all of the controversial companies whose stocks trade trade like a spinning top.

I encourage all of my readers to analyze situations where there are fewer eyeballs looking.  Analyze situations where control investors limit the trading relative to the size of the firm.  Go where others don’t go, because it is dull.  Look for advantage where few others do.  And after that, be willing to hold for a while — years, not months.  Pay attention as to whether the company has a defensible business model — strong balance sheet, moat versus competition, etc.  Then look for a reasonable to low price.  There is the making of a good investment.

Full disclosure: long CVX & BRK/B