Hidden Treasures Await Scholars of `Neglected Stocks'
Luke, Robert, THE JOURNAL RECORD
By Robert Luke
Cox News Service
ATLANTA _ Some stocks are consigned to the trash heap of neglect.
They're ignored by industry analysts, the media and most investors, too.
But astute investors willing to do their homework can find some hidden treasures among the lot. It's not easy and there are no guarantees, so don't invest the mortgage money.
Still, solled "neglected stocks," which sometimes don't appear in newspaper stock tables, can be a reasonable option for investors willing to take some risk.
Also, some mutual funds have portions of their portfolios invested in such stocks.
One of those funds is the Fidelity Lowiced Stock Fund _ ranked No. 2 out of the 116 small company growth funds tracked by Lipper Analytical Services. Its total return so far this year is 12.1 percent, compared with the minus 5.74 percent average for the 116 funds.
Joel Tillinghast, Fidelity Lowiced Stock Fund manager, has made big bucks with neglected stocks.
Take Spartan Motors, for example. No industry analyst covered the Charlotte, Mich., maker of custom vehicle chassis until its earnings more than doubled in each of the past two years. When analysts ignore a company, few people know about it, and trading in the stock is limited. The trick is to find a neglected stock before it takes off and loses its anonymity.
"At the start of 1991, Spartan Motors was trading at $2.62," Tillinghast recalled. He scooped up some shares at around $3. "At its peak in February of this year, it was at $34.75."
But what goes up must come down. That's why every investor needs to think about when enough is enough.
Shares of Spartan Motors took a dive last month after the company announced that secondarter earnings wouldn't meet analysts' expectations. The price tumbled by oneird in just one day.
Tillinghast was lucky enough to have sold some of his holdings in the $20 range. But he's hanging on to the rest, now worth about $14 a share.
"It's a very welln company and its products are very good," he explained. "But I'd be a bit cautious here (of buying) because it did attract a lot of Wall Street following so quickly. It's no longer a neglected stock."
For every fallen angel, there is another potential rising star.
Out of the universe of some 20,000 publicly traded companies, only about 7,000 are listed on one of the major exchanges. …