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.

Sector Market Cap ($M) Dollar Volume ($K) Days to turn over
05 – Consumer Non-Cyclical 1,536,807 7,274,592 211
07 – Financial 3,511,041 16,767,713 209
12 – Utilities 1,051,811 5,348,267 197
06 – Energy 2,425,787 14,781,550 164
02 – Capital Goods 1,253,361 7,882,012 159
08 – Health Care 2,428,969 16,080,916 151
Grand Total 23,817,027 161,861,109 147
01 – Basic Materials 947,830 6,770,631 140
11 – Transportation 594,989 4,279,380 139
03 – Conglomerates 15,805 116,462 136
09 – Services 4,936,835 37,308,869 132
10 – Technology 4,368,575 38,382,921 114
04 – Consumer Cyclical 745,217 6,867,798 109

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:

Industry Market Cap ($M) Dollar Volume ($K) Days to turn over
0715 – Insurance (Property & Casualty) 632,449 1,730,968 365
0112 – Fabricated Plastic & Rubber 3,298 10,484 315
1206 – Natural Gas Utilities 435,106 1,407,846 309
0506 – Beverages (Non-Alcoholic) 354,710 1,217,841 291
1103 – Air Courier 139,858 505,601 277
0521 – Personal & Household Products 434,008 1,574,389 276
1209 – Water Utilities 17,103 64,198 266
0724 – Money Center Banks 223,336 877,033 255
0524 – Tobacco 272,385 1,170,334 233
0606 – Oil & Gas – Integrated 438,181 1,900,557 231
0957 – Retail (Grocery) 398,981 1,740,963 229
0712 – Insurance (Miscellaneous) 51,749 227,575 227
0218 – Misc. Capital Goods 417,891 1,859,649 225
0975 – Waste Management Services 59,927 283,562 211
0730 – S&Ls/Savings Banks 1,887 9,013 209
1112 – Railroads 186,397 902,219 207
0809 – Major Drugs 227,419 1,135,147 200
0915 – Communications Services 692,373 3,519,894 197
0503 – Beverages (Alcoholic) 52,692 273,645 193
0727 – Regional Banks 1,227,813 6,422,106 191
1030 – Scientific & Technical Instruments 265,595 1,393,898 191
0706 – Insurance (Accident & Health) 247,622 1,310,785 189
0718 – Investment Services 554,225 2,934,362 189
0418 – Footwear 80,706 428,470 188
0512 – Fish/Livestock 1,917 10,383 185
0703 – Consumer Financial Services 405,697 2,203,610 184
0203 – Aerospace and Defense 402,223 2,254,100 178
0960 – Retail (Home Improvement) 169,283 956,876 177
0127 – Misc. Fabricated Products 77,222 439,594 176
0221 – Mobile Homes & RVs 5,297 31,414 169
0612 – Oil Well Services & Equipment 574,292 3,407,144 169
0106 – Chemicals – Plastics and Rubbers 173,053 1,038,370 167
0954 – Retail (Drugs) 230,495 1,417,370 163
1109 – Misc. Transportation 73,963 456,181 162
0103 – Chemical Manufacturing 353,360 2,227,847 159
0709 – Insurance (Life) 166,263 1,052,261 158
0803 – Biotechnology & Drugs 1,613,675 10,424,895 155
1203 – Electric Utilities 599,603 3,876,223 155
0415 – Auto & Truck Parts 203,596 1,324,773 154
0509 – Crops 4,889 31,874 153
0918 – Hotels & Motels 94,044 616,953 152
0609 – Oil & Gas Operations 1,386,175 9,141,482 152
0209 – Construction – Supplies and Fixtures 140,270 934,529 150
1006 – Computer Hardware 72,374 487,123 149
1036 – Software & Programming 1,152,944 7,816,781 147
Grand Total 23,817,027 161,861,109 147
0921 – Motion Pictures 159,568 1,105,864 144
1024 – Electronic Instruments & Controls 182,569 1,279,912 143
0515 – Food Processing 403,598 2,854,143 141
0909 – Business Services 446,084 3,157,933 141
0812 – Medical Equipment & Supplies 436,733 3,130,033 140
0930 – Printing Services 7,170 51,557 139
0109 – Containters & Packaging 81,869 590,633 139
0933 – Real Estate Operations 594,286 4,295,888 138
0206 – Construction & Agricultural Machinery 137,131 991,809 138
0303 – Conglomerates 15,805 116,462 136
0969 – Schools 21,108 160,274 132
1115 – Trucking 44,104 336,398 131
0939 – Rental & Leasing 238,564 1,828,936 130
0130 – Non-Metallic Mining 4,789 37,031 129
0942 – Restaurants 219,661 1,709,208 129
1118 – Water Transportation 32,241 255,920 126
0406 – Appliances & Tools 55,182 456,389 121
0927 – Printing & Publishing 91,943 760,613 121
0133 – Paper & Paper Products 30,855 256,597 120
0936 – Recreational Activities 75,698 643,463 118
0124 – Metal Mining 98,839 864,894 114
0430 – Recreational Products 54,015 474,019 114
0421 – Furniture & Fixtures 31,741 279,508 114
0948 – Retail (Catalog & Mail Order) 266,904 2,421,091 110
0806 – Healthcare Facilities 151,142 1,390,841 109
0121 – Iron & Steel 76,186 704,432 108
0924 – Personal Services 41,546 386,447 108
0403 – Apparel/Accessories 89,378 848,477 105
1018 – Computer Services 1,023,238 9,989,880 102
1003 – Communications Equipment 837,801 8,227,385 102
0972 – Security Systems & Services 8,892 88,979 100
1021 – Computer Storage Devices 124,136 1,290,696 96
0963 – Retail (Specialty Non-Apparel) 216,223 2,271,386 95
0945 – Retail (Apparel) 160,390 1,696,879 95
0906 – Broadcasting & Cable TV 471,387 5,029,758 94
0433 – Textiles – Non-Apparel 11,455 123,789 93
1033 – Semiconductors 670,980 7,309,563 92
0951 – Retail (Department & Discount) 102,849 1,133,640 91
1012 – Computer Networks 14,378 159,288 90
0903 – Advertising 39,473 442,180 89
0409 – Audio & Video Equipment 11,660 130,676 89
0518 – Office Supplies 12,608 141,981 89
0215 – Construction Services 119,782 1,361,922 88
0912 – Casinos & Gaming 109,703 1,259,520 87
0424 – Jewelry & Silverware 6,527 78,568 83
0603 – Coal 27,139 332,366 82
0118 – Gold & Silver 20,871 256,842 81
0115 – Forestry & Wood Products 27,489 343,907 80
1027 – Office Equipment 4,010 51,064 79
0412 – Auto & Truck Manufacturers 189,092 2,548,454 74
0436 – Tires 8,943 126,838 71
0212 – Construction – Raw Materials 30,768 448,589 69
1106 – Airline 118,426 1,823,061 65
0966 – Retail (Technology) 20,283 329,637 62
0427 – Photography 2,923 47,837 61
1015 – Computer Peripherals 20,549 377,330 54

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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