As discussed in this article last week, the 'Seeking Alpha' indicator provides a new insight into the popularity of individual stocks amongst active investors.
The original 2 stocks discussed, Velti (VELT) and Green Dot (GDOT), have already seen some large increases in followers. In fact, Velti has already exceeded the 100 follower level showing that the stock is suddenly garnering investor attention.
After some more research, we've found 3 more appealing stocks that surprisingly have less than 100 followers. By the way, it wasn't overly hard to find unappealing small caps with under 100 followers.
Amazingly, this list includes a couple stocks in hot sectors. Deepwater driller Pacific Drilling (PACD) only has 82 followers while application delivery provider Radware (RDWR) has a shockingly low 74 followers. Lastly, airplane leasor AerCap Holdings (AER) has a limited following of 52 though maybe not as surprising as the 2 others given the sector.
This company has a fleet of seven ultra-deepwater drillships with four currently operating and three under construction. With one of the youngest and most technologically advanced fleets in the world, the company should be able to take advantage of the growing demand for ultra-deepwater ships as evidenced by the recent $650K dayrate obtained by a relatively old Transocean (RIG) drillship.
As the company just began operating the initial drillships, the 2011 financials are misleading. Looking at 2012, analysts expect revenue in the $670M range and earnings of $.82. Hard to value compared to the sector as the company expects to nearly double ships by 2014.
Considering the sector, the lack of followers makes the stock compelling. Though the stock just began trading on US exchanges in November 2011, it is still surprising that investors are unaware of it. As an example, established competitor Atwood Oceanics (ATW) has 277 followers while industry behemoth Transocean has 2,522 following.
Another potential indicator worth noting is that the company has had only one focus article on Seeking Alpha in the roughly four months of being public.
This company is a leading provider of application delivery and application security solutions for virtual and cloud data centers. As with Pacific Drilling, it operates in an attractive sector so the lack of interest is puzzling.
With a market cap of $750M, the stock falls solidly into the small cap sector though it isn't too small that it should be overlooked. Revenue is only expected to grow at 13% this year, though the company historically beats estimates.
At a forward P/E of 18, the stock isn't extremely cheap suggesting that at least the institutional community knows the stock. Though the stock only has four analysts covering it, suggesting otherwise. Radware hasn't had a focus article since the end of 2009. Incredible for a fast growing tech stock, especially one in the cloud and data center sector.
This company is a leading independent aircraft leasing company with one of the youngest fleets in the industry. It has over $9B of assets and 350 aircraft with a focus on fuel-efficient narrowbodies.
With a market cap of nearly $1.7B, the stock shouldn't be under the radar, yet it trades with a forward P/E of 5.7. Also, revenue will surpass $1.1B, making the company far from small. Ironically, it almost has as many analysts (12) covering the stock as followers (52) on Seeking Alpha.
Interesting to note is that smaller competitors Fly Leasing (FLY) and Aircastle Limited (AYR) both have more than double the followers. The presumable reason is the juicy dividends paid by the competitors. While AerCap has traditionally focused on reallocating capital towards expanding, it might just be time to go with the industry flow and pay a substantial dividend.
At least this company has had a focus article written in the last 9 months, but that was the first in over 2 years. One article in the last 3 years highlights the lack of interest making this a promising under the radar stock.
Sometimes it can be hard to understand why certain stocks aren't followed. These three stocks provide perfect examples of great companies that investors have to dig in order to find. Maybe the amount of followers is somehow tied to the lack of contributors writing about these companies.
Whether this indicator turns out to be useful remains too early to be seen, but one thing is for sure. Active investors are not following these stocks even though all three offer the promise of solid returns.