Can a Tyrannosaurus Spot Its Prey at a Standstill?
This question remains open in the field of paleontology. However, if we assume the answer is negative, a comparison can be drawn to the stock market.
Momentum investors gravitate towards stocks hitting new peaks, while value investors focus on those that have declined sharply. Conversely, stocks that remain stagnant often go unnoticed.
Annually, I discuss my “Do-Nothing Club,” which includes stocks that are within 5 percentage points of their price a month and a year ago. Below are five promising Do-Nothing stocks that I believe have potential for better performance.
Raymond James
Raymond James Financial Inc. (RJF) hasn’t generated any return for its shareholders over the past year, a notable change from the previous decade where it gained over 300%. Originally a securities brokerage, it now predominantly earns from investment management and has recorded profits for 30 consecutive years. Despite this, only five out of 14 analysts recommend it, which I believe overlooks its potential by focusing too much on recent trends.
Gentex
Gentex Corp. (GNTX), located in Zeeland, Mich., specializes in automotive mirrors that adjust to headlights and alert drivers about blind spots, in addition to its original smoke detectors. With earnings rising over 13% in the last four quarters, it’s surprising that the stock price has remained stable. Furthermore, the company is nearing a debt-free status, which is uncommon in today’s market.
EQT
EQT Corp. (EQT), based in Pittsburgh, is the leading natural gas producer in the Appalachian Basin. Established in 1884, it adopted its current name in 2009. With ongoing disruptions in oil supply due to Middle Eastern conflicts, I anticipate natural gas will capture more market share from oil for residential heating and power generation. EQT’s shares are valued at 11 times earnings, a compelling figure in the current landscape.
Banner
Banner Corp., which owns Banner Bank with numerous branches across the Western U.S., trades at under 11 times earnings. Investor hesitation primarily stems from concerns over its significant exposure to commercial real estate loans and slow growth. Nevertheless, the bank has reported profits in 23 of the past 25 years and maintains a modest debt level of only 6% of equity.
Korn Ferry
Korn Ferry, hailing from Los Angeles, specializes in business consulting and executive search. Over the past decade, it has achieved profit growth surpassing 10% annually, with last year showing an 8% increase. The stock trades at 1.2 times revenue and 13 times earnings, which I find favorable, coupled with a 16-year streak of profitability.
Performance Overview
Since 1999, I’ve written 22 columns on the Do-Nothing Club, with today marking the 23rd. The average one-year return of my Do-Nothing Club selections has been 16.6%, outperforming the Standard & Poor’s 500 Total Return Index, which clocked in at 10.4%. My recommendations have yielded profits in 19 out of 22 years, outshining the index 13 times.
It should be noted that the results presented are hypothetical and differ from actual client outcomes. Historical performance is not indicative of future results. Last year’s returns boosted the average, driven by a 65% gain due to significant returns from Century Aluminum Co. (CENX) and Preformed Line Products Co. (PLPC), while three other selections didn’t fare well.
Correction: I misnamed Green Plains Inc. (GPRE) as Great Plain Inc. in my previous column.
Disclosure: One of my clients holds shares in EQT.
