A Different Look at Neglect by David Merkel, CFA of The Aleph Blog

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

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