Wall Street ignores these 'orphan' stocks, but they've beaten the S&P 500 over 20 years

By Philip van Doorn

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.

In his CWS Market Review newsletter on Aug. 17, Eddy Elfenbein mentioned Nathan’s Famous Inc. (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:

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 , 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 . 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 IndexSPX  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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-Philip van Doorn

 

(END) Dow Jones Newswires

10-01-21 2317ET

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