October 16, 2021

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

3 min read

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:

  • 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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