#Deep Dive: Wall Street ignores these ‘orphan’ stocks, but they’ve beaten the S&P 500 over 20 years
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“#Deep Dive: Wall Street ignores these ‘orphan’ stocks, but they’ve beaten the S&P 500 over 20 years”
A business might be considered boring, but a solid operator can make owners of its stock a lot of money while flying under the radar
Wall Street is in the business of selling stocks. But it ignores some of them, and some of the “orphan stocks” ignored by analysts have been incredible long-term performers.
When an investment bank (which is probably also a brokerage firm) underwrites a new offering of stock, it has the job of selling those shares to investors. Later on, analysts working for brokerage firms continue to cover the stocks and rate them based on earnings estimates and share-price targets.
NATH,
as an example of a stock “that is up more than 35-fold in the last 20 years” while being overlooked by Wall Street.
Elfenbein listed other of his favorite orphans, such as Atrion Corp
ATRI,
, which makes fluid delivery equipment used for various medical applications, and Chase Corp.
CCF,
which manufactures various protective materials.
All three are included in the list below.
Since an orphaned stock isn’t covered by analysts, no estimates for sales or earnings are available.
A few caveats:
- A lack of coverage by analysts now doesn’t mean a company hasn’t been covered by them before.
- A company may have particularly weak operating characteristics now or in recent years even though its 20-year return appears to be stellar.
- Most of these 20-year winners have lagged the S&P 500 for the past five years.
- You should keep survivor bias in mind. Any list of stocks showing long-term returns excludes those that have fallen by the wayside. Some companies have gone bankrupt or been forced to sell to stronger competitors.
An orphan stock screen
To identify a list of orphan stocks with excellent 20-year performance records, we began with the components of the Russell 3000 Index
RUA,
which represents 98% of stocks traded in the U.S. Specifically, we started with the components of the Vanguard Russell 3000 ETF
VTHR,
which tracks the index by holding all of its component stocks.
Among the Russel 3000, there are 118 orphan stocks not covered by any analysts polled by FactSet.
Among those 118 orphan stocks, 74 have traded for at least 20 years, and 34 of those have beaten the 20-year return of the S&P 500 Index
SPX,
Eight have beaten the index over 5, 10 and 15 years as well, and they are bolded in the table.
Here are the 74, listed by 20-year total return with dividends reinvested. Their market values range from less than $200 million to $12.8 billion. At the bottom of the table are figures for the S&P 500:
| Company | Return – 20 Years | Return – 15 Years | Return – 10 Years | Return – 5 Years | Market cap. ($mil) | ||
|
Diamond Hill Investment Group Inc. BRDG, |
8905% | 783% | 319% | 21% | $571 | ||
|
NewMarket Corp. NEU, |
7532% | 723% | 188% | -13% | $3,733 | ||
|
EVI Industries Inc. EVI, |
6722% | 2511% | 3556% | 428% | $300 | ||
|
Atrion Corp. ATRI, |
3783% | 1065% | 292% | 56% | $1,198 | ||
|
Amerco UHAL, |
3742% | 902% | 871% | 92% | $12,806 | ||
|
Nathan’s Famous Inc. NATH, |
3472% | 843% | 519% | 61% | $284 | ||
|
Winmark Corp. WINA, |
3231% | 835% | 439% | 113% | $728 | ||
|
U.S. Lime & Minerals Inc. USLM, |
2730% | 382% | 304% | 154% | $832 | ||
|
Chase Corp. CCF, |
2616% | 1645% | 936% | 97% | $1,093 | ||
|
Tucows Inc. TCX, |
2223% | 1920% | 2395% | 179% | $793 | ||
|
Hingham Institution for Savings HIFS, |
1837% | 958% | 532% | 137% | $639 | ||
|
RCI Hospitality Holdings Inc. RICK, |
1788% | 844% | 734% | 489% | $557 | ||
|
CorVel Corp. CRVL, |
1631% | 1492% | 626% | 282% | $2,742 | ||
|
Investors Title Co. ITIC, |
1547% | 490% | 615% | 153% | $360 | ||
|
Seaboard Corp. SEB, |
1515% | 203% | 82% | 34% | $4,798 | ||
|
NVE Corp. NVEC, |
1489% | 323% | 82% | 57% | $331 | ||
|
Cass Information Systems Inc. CASS, |
1356% | 216% | 136% | 21% | $632 | ||
|
FRP Holdings Inc. FRPH, |
1113% | 248% | 246% | 77% | $539 | ||
|
Daily Journal Corp. DJCO, |
977% | 726% | 337% | 37% | $433 | ||
|
Utah Medical Products Inc. UTMD, |
963% | 321% | 309% | 50% | $321 | ||
|
Ingles Markets Inc. Class A IMKTA, |
957% | 332% | 472% | 93% | $923 | ||
|
Miller Industries Inc. MLR, |
956% | 157% | 178% | 104% | $431 | ||
|
Marine Products Corp. MPX, |
950% | 124% | 267% | 85% | $453 | ||
|
National Presto Industries Inc. NPK, |
918% | 365% | 81% | 29% | $625 | ||
|
VirnetX Holding Corp. VHC, |
899% | 1053% | -80% | 56% | $252 | ||
|
First Bancorp Inc. FNLC, |
884% | 235% | 247% | 77% | $326 | ||
|
Oil-Dri Corp. of America ODC, |
875% | 254% | 150% | 8% | $185 | ||
|
Village Super Market Inc. Class A VLGEA, |
801% | 166% | 32% | -11% | $234 | ||
|
Pure Cycle Corp. PCYO, |
741% | 59% | 329% | 213% | $342 | ||
|
Universal Health Realty Income Trust UHT, |
709% | 267% | 156% | 15% | $796 | ||
|
IDT Corp. Class B IDT, |
617% | 525% | 971% | 356% | $1,167 | ||
|
P.A.M. Transportation Services Inc. PTSI, |
614% | 185% | 716% | 269% | $392 | ||
|
Century Bancorp Inc. Class A CNBKA, |
568% | 450% | 405% | 171% | $419 | ||
|
Flexsteel Industries Inc. FLXS, |
488% | 331% | 224% | -4% | $252 | ||
|
S&P 500 Index SPX, |
469% | 367% | 356% | 124% | |||
| Source: FactSet | |||||||
You can click on the tickers for more about each company, including business profiles and trailing price-to-earnings ratios (since consensus earnings estimates that drive forward P/E ratios aren’t available). For comparison, the trailing P/E for the S&P 500 is 25.
The largest company on the list by market cap is Amerco
UHAL,
which rents moving vehicles and equipment through company-owned U-Haul stores and through stores owned by independent dealers.
If you see any stocks on the list that interest you, homework is in order. No estimates are available to help you consider how rapidly a company may increase its sales or earnings from here. So read up, consider a company’s business strategy and form your own opinion about how likely it is to remain competitive over the next decade or two.
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