Low Share Turnover, Little-Known Shares Do Best!

25th Mar '15 by Edmund Shing

7 comments 14777 reads

I came across this great seekingalpha article today, looking at the work of noted stock market historian Roger Ibbotson.

The thesis is simple: that Popular stocks perform least well, while little-traded, "unpopular" stocks perform best over the long-term.

This is a great chart from the above article that illustrates the outperformance neatly:

Source: Victor Wendl

Extending this concept to the UK stock market, which stocks are least "popular", as judged by average yearly share turnover?

UK stocks out of the FTSE All-Share index that come up as having the lowest proportion of their market cap. traded over the last 12 months include:

Euromoney Institutional Investor (LON:ERM)

Town Centre Securities (LON:TCSC)

Daejan Holdings (LON:DJAN)

NMC Health (LON:NMC)

Goodwin (LON:GDWN)

SThree (LON:STHR)

Laura Ashley Holdings (LON:ALY)

Mountview Estates (LON:MTVW)

A.G.Barr (LON:BAG)

Management Consulting (LON:MMC)

Interestingly, these names also overlap with another well-known stock market outperformance phenomenon, that of the outperformance of companies with large founder or family shareholdings.

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monzo

25th Mar '15

Daejan Holdings (LON:DJAN) is on my watch list. It was trading sideways last year in a tight range and I was waiting for a pullback for a decent entry point. £50 was always a tough hurdle for the SP but look how quickly it broke out to the upside and kept going. Oh well.

Interesting article though, I will take a look at some of the others,

Thanks

Cisk

It must be a self-fulling prophecy as if a larger % of a company's shares are held by family then of course there's a smaller free float hence the shares will be traded less (assuming the family shareholdings are stable).

What would be more interesting (and challenging to discover) is to map the frequency of appearance in social media (specifically blogs & BBs, e.g. ADVFN) against share price performance (although won't be able to go back to the 70s as blogs / BBs didn't exist then..).

Re: Daejan Holdings (LON:DJAN) - might be at its peak if you think London property values are way overpriced? Walking around central London (including Africa house which I think is a large redevelopment by £DJAN) there's a significant amount of empty office space around. Purely unscientific observation of course.

Sniggolb

10th Aug '16

Daejan is a great share: solid and conservatively run by a well established and vey rich family. .

VegPatch

Re Mountview
Please see my previous posts on Mountview (£MTVW) this remains significantly undervalued even if London residential prices are too dear. Also it is run for the long term, not today, tomorrow or next week. Rather the next 10 years. The primary reason for the lack of short termism is the the Sinclair family concert party, which owns over 50% of the shares outstanding. The company has been trading for over 79 years. DM Sinclair is the son of the founder. He will not mortgage the company's future for a quick buck. Also given the family shareholding, they can't buy / sell shares as they are over 30%, so naturally it will have a much lower turnover that say Land Securities, which is rented, rather than owned by many fund managers.

http://www.stockopedia.com/content/mountview-strong-results-and-firmly-undervalued-113040/

http://www.stockopedia.com/content/mountview-estates-technical-index-selling-creates-buying-opportunity-134774/

One of my largest long term positions.

iwright7

11th Aug '16

Edward,

I see that the FSTE list is over a year old. Is it possible for you to update it, (maybe the list remains similar), or suggest a screen to update?

FREng

9th Oct '19

£TCSC (Town Centre Securities) was recently added to John Lee's portfolio ("very substantial discount to assets, 6.4% yield, carefully stewarded" according to his FT article).

But the recent Final results state that the dividend is fully covered, whereas the StockReport says dividend cover is negative.

Can anyone here explain the discrepancy?

hayashi22

Interesting..though Laura Ashley has not been very successful.

Low Share Turnover, Little-Known Shares Do Best!

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Edmund Shing

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