The 10 Best Stocks You’ve Never Heard Of

Your list of the best stocks probably starts with the household names you’ve heard of. You’ve heard of Apple (AAPL). You’ve heard of Amazon (AMZN). If you don’t own their stocks, it’s probably not because you haven’t considered it.

Investing in companies you know and are comfortable with isn’t a bad idea. Peter Lynch famously made millions in L’Eggs thanks to his wife’s love of the brand.

But limiting your investment research to companies you already know about, or starting there when you want to add a stock to your portfolio, means you’re not hearing about hundreds of other great companies that aren’t household names.

Often these companies are lesser known because they’re B2B—they sell to other businesses, instead of consumers—or they’re parent companies of a bunch of smaller businesses. Whatever the reason, being under the radar has its benefits. Lesser-known stocks tend to be less volatile. General Motors (GM) stock moves every time auto sales numbers are released. Facebook (FB) shareholders have had to deal with months of front-page scandals, and declining public perception of the company.

If there’s no public perception of your company, it has nowhere to go but up!

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Sound enticing? Read on. Below are the 10 best stocks you’ve never heard of. Pick one or two you like, and next time your neighbor or your brother-in-law brings up Tesla (TSLA) or Netflix (NFLX) or some other stock everyone already knows about, you can tell him about a great little rental company you just heard about, or this payment processing stock that just keeps going up.

10 Best Stocks You’ve Never Heard Of

Best Stock You’ve Never Heard Of #1: BOK Financial (BOKF)

You probably know the name BOK if you live in Tulsa, where BOK’s eponymous headquarters building is located. (Built in 1976 by the same architect who designed the World Trade Center, BOK Tower was the tallest building in the plains states until 2011). But BOK is unlikely to be familiar to non-Oklahomans. The company’s consumer banks operate under the names Bank of Oklahoma, Bank of Albuquerque, Bank of Arizona, Bank of Arkansas, Bank of Texas, Mobank, and Colorado State Bank and Trust. And BOK has non-consumer facing corporate banking, merchant services, brokerage, trading and asset management businesses.

With a market cap of $6.9 billion, BOK is about the size of Zillow (Z), but sees a tenth of the trading volume on an average day.

About 43% of income is fee-based, adding reliability and insulation against interest rates to BOK’s cash flow. Revenues have grown for three years in a row, and are expected to rise by 2% this year, followed by 5% growth in 2019. Analysts expect EPS to balloon by 27% this year, fueled by tax cuts, followed by 4% growth next year. The stock pays regular quarterly dividends, and currently yields about 1.7%. Management has increased the dividend every year since 2005, but the stock’s current payout ratio is only 27%.

And BOKF has been in an uptrend since September, and recently found support around its 50-day moving average in February, March and May.

Best Stock You’ve Never Heard Of #2: Broadridge Financial (BR)

You’ve probably never heard of Broadridge Financial (unless you subscribe to Cabot Dividend Investor—I recommended the stock to members in June and we now have a 49% profit) and the company’s name doesn’t give much away. In fact, it’s a bit of a misnomer—Broadridge isn’t a financial company, but a tech company that provides technology and services to financial companies. I know: not exactly a compelling elevator pitch. But take a look at the chart before you call Broadridge boring. The stock is up 57% over the past year—116% over the past three years—and 320% over the past five years. EPS and revenues have each increased every year since 2011. This year, analysts expect revenues to rise 4%, fueling 30% EPS growth (there’s that tax cut again). Over the next five years, EPS are expected to grow by about 10% per year. That boring but predictable growth has fueled pleasantly steady gains in the stock, and 10 years of dividend increases. BR now yields 1.3%. But the real prize here is a stock that just goes up week after week and month after month, without generating a whole lot of fanfare or causing a whole lot of anxiety.

Best Stock You’ve Never Heard Of #3: Brown & Brown (BRO)

Brown & Brown is the sixth-largest independent insurance intermediary in the U.S., according to its Wikipedia page, which is only two paragraphs long. It was founded in 1939 and has a market cap of $7.6 billion, making it larger than Wayfair (W, with a market cap of $7.5 billion), Xerox (XRX, $7.3 billion) and Harley-Davidson (HOG, $7.2 billion). But it has half the trading volume of any of them, and maybe 1% of the name recognition.

That’s not a problem for BRO shareholders, who have watched the stock advance 71% over the past three years. Revenues have increased each year since 2010, and are expected to grow 5% this year and next. EPS, which have also risen every year since 2010, are expected to grow by an average of 10% per year over the next five years. Plus, Brown & Brown has paid a dividend since 1986, and has increased the dividend every year since 2001, for a current yield of 1.0%.

The stock has been in an uptrend since the start of 2016, and has strong support at its 200-day moving average, currently around 25. If you can get over the fact that it sounds like it was carefully crafted to be as boring as possible (the company is called Brown & Brown, and they sell insurance for other insurance companies) BRO could become your new favorite stock.

Best Stock You’ve Never Heard Of #4: Ecolab (ECL)

Ecolab isn’t boring so much as complicated. The 95-year-old company is typically classified as a chemical company, but it provides a wide range of products and services, many related to cleaning or water, that generally help customers be both more efficient and more environmentally friendly.

Still awake?

Let’s try some examples. Ecolab makes an antimicrobial wash for fruits and vegetables that reduces spoilage and food waste, while also preventing food-borne illnesses like E. coli and Salmonella. They developed the first environmentally-friendly solvent for cleaning automotive paint booths. They make a dry lubricant used on bottling plant conveyor belts that reduces water usage by 97%. They invented something called latex flocculants that are key to wastewater treatment. They even have a team of highly-trained “Tunnel Doctors” who travel to laundries around the world to diagnose and fix problems.

They can’t be summed up in one sentence, or even one paragraph, and their website includes a lot of descriptions like “we offer safe and reliable solutions for efficiency and profitability.” Their technology often lies on the border between boring and brilliant: it makes a huge difference to the customers who use it, but solves problems most of us don’t even know exist. (Have you ever wondered how automakers clean their paint booths? Neither have I.)

But, because Ecolab’s technologies are indispensable to those who use them, and the company is the undisputed leader in the space, the vast majority of revenues are recurring, and cash flow is rock solid. Over the past five years, EPS have increased by an average of 10% per year. Analysts expect EPS to rise another 15% this year, followed by 12% growth next year.

And in addition to capital gains, ECL investors can count on a reliable stream of dividend income. Ecolab came public in 1957 and began paying a dividend in 1986. The company increased the dividend by 7% the next year, and has continued to increase the dividend every year since then. The stock currently yields 1.1%, and has a payout ratio of only 30%.

Best Stock You’ve Never Heard Of #5: Expeditors International (EXPD)

Expeditors International has a market cap of $12.6 billion, making it bigger than Viacom (VIAB, $11.5 billion), Whirlpool (WHR, $11.5 billion), Campbell Soup (CPB, $12.0 billion) and Chipotle Mexican Grill (CMG, $12.2 billion). But the company rarely makes the news, and the name sounds like something George Costanza would make up.

But Expeditors International is very real: they have over 300 locations in 109 countries, and 16,944 employees (maybe you know one of them!). They describe themselves as a global logistics and freight forwarding company, which means they make sure stuff—a lot of stuff—gets where it needs to be, when it needs to be there. They don’t own ships and planes, but instead purchase cargo space from carriers and re-sell it (along with services like warehousing and customs brokerage) to customers in industries from energy to fashion to aerospace. The company has benefitted from the overall growth of global trade as well as being a prime consolidator in an industry made up of lots of small companies.

Revenues are dependent on global economic activity, but are expected to rise 7% this year and 6% next year, fueling 18% and 8% EPS growth. And stability is provided by the dividend, which has been increased every year for 23 years. The stock currently yields 1.2%, with a payout ratio of 29%. EXPD has been in an uptrend for about a year and half, has strong support at its 200-day moving average, and just gapped up to a new 10-year high after reporting first-quarter earnings.

Best Stock You’ve Never Heard Of #6: FLIR Systems (FLIR)

FLIR Systems has a $7.5 billion market cap, so they’re about the same size as Brown & Brown, and have similar trading volume. Unlike Brown & Brown, which is just boring, FLIR is actually pretty cool: they make thermal imaging sensors and cameras. But because about 40% of sales are to the military (drones are big market) and another 40% are to industrial customers, there’s a good chance you haven’t heard of them.

The remaining 20% of the business includes some cool applications. Think cameras that can count people in a mall or at an intersection, handheld search and rescue tools that can detect body heat, or sensors for autonomous cars.

The company was actually in the news briefly back in April, when it agreed to pay $30 million to settle claims that it violated Federal arms trade regulations (there’s a lot of rules about who U.S. companies can sell military equipment to), but the stock barely blinked. It wasn’t FLIR’s first scandal: the CEO was fired over accounting issues in 2000, the SEC sued the company for similar reasons in 2002, and the company re-stated a decade’s worth of financial statements in 2007 (which led to an investor lawsuit). Then, it took almost 10 years for the company to surpass its 2008 highs, but it finally did last October, thanks to some self-driving car hype.

Now, FLIR is in a strong uptrend, and EPS are expected to rise 22% per year over the next five years, thanks to steady growth in defense spending and the gradual expansion of other markets.

Best Stock You’ve Never Heard Of #7: Global Payments Inc. (GPN)

Another company that’s big ($18 billion market cap) but works mostly behind the scenes, Global Payments does just what it says on the label: process credit and debit card payments. The company is one of the biggest such companies in the world, with about 8,500 employees and 1 million merchant locations. About 75% of revenues come from North America, 18% from Europe and 7% from Asia.

But while the stock isn’t well-known, it’s no slouch. GPN has been in an uptrend since late 2013, with one long pause for consolidation in 2016. The stock has steadily gained 30% over the past 12 months, staying well above its 200-day moving average the whole time, thanks in part to quickly improving earnings estimates. Analysts are now anticipating double-digit EPS growth this year and next (27% and 16%) and average EPS growth of 18% per year over the next five years.

Best Stock You’ve Never Heard Of #8: W.W. Grainger (GWW)

W.W. Grainger is bigger than most of the stocks on this list, with a market cap of $17.2 billion. But the stock flies under the radar of most investors (daily average volume is only 813,000 shares) because most sales are business-to-business. Grainger makes a wide range of industrial components and supplies, like motors, lighting, fasteners, tools and safety equipment. They have plenty of customers, from plumbers to power plants, but they’re not a household name.

That’s allowed GWW (surname first when it comes to the stock symbol) to steadily advance 75% over the past year, with minimal fuss. The stock has been trending up since September, with strong support from its 50-day moving average, including bounces in October, January, March and May. Going forward, analysts expect high single-digit revenue growth this year and next, and average EPS growth of 15% over the next five years. Oh, and the company has increased its dividend every year since 1972—that’s 46 years of dividend growth.

Best Stock You’ve Never Heard Of #9: Jack Henry & Associates (JKHY)

Jack Henry & Associates is almost a large cap stock, with a market value of $9.44 billion, but average volume is a paltry 314,000 shares a day. Is it because the stock’s ticker is an alphabet soup of consonants? Is it because the company’s homepage features descriptions like “leading provider of the integrated technology platforms banks need to process financial transactions, automate business processes, and manage mission-critical customer and business information?”

Whatever the reason, JKHY doesn’t get a lot of attention. But revenues have risen in each of the last 10 years, by an average of 7% per year. EPS are expected to rise 8% this year and 18% next year. And the company has increased its dividend for 14 years in a row, and currently yields 1.2%.

(By the way, if you’re still wondering what Jack Henry actually does, they mostly process payments for financial institutions. Turns out there’s a bunch of companies that get involved every time you swipe your credit or debit card, and they make good money doing it.)

Best Stock You’ve Never Heard Of #10: McGrath RentCorp (MGRC)

Last but not least comes McGrath RentCorp, which at least has a descriptive name and a stock symbol that’s actually an acronym. The company’s business is also pleasantly tangible, if not consumer-facing. McGrath rents four different types of equipment: modular buildings, storage containers, electronic equipment and containment tanks and boxes. McGrath’s modular buildings are used in a variety of applications: as on-site sales offices, job site construction trailers, temporary classrooms, overflow government offices, and more. The tanks and containers are used for temporarily storing liquid, solid and hazardous materials on oil fields, construction sites and disaster cleanup sites, and more.

Revenues have grown consistently almost every year since 1984, with temporary pullbacks during the last two recessions. While the tank and electronic equipment rentals tend to be fairly short-term, modular building rentals are generally longer-term and add predictability to revenues. This year, analysts expect 32% EPS growth—thanks in part to the lower tax rate—followed by 9% growth next year. Over the next five years, EPS are expected to grow by about 14% per year, on average.

McGrath also pays a dividend, which has been raised every year for the past 25 years. The dividend increases have been slow and steady, with the boosts averaging 7% over the past five years. However, management just handed investors a huge 31% dividend increase in February, funded in part by the company’s big tax cut. And the stock has been no slouch either, rising 88% over the past 12 months and nearly 40% just since the start of this year.

Heard of these stocks already? Worked at one of them? Leave a comment or send me an email and let me know your opinion.

And if you’d like to get a list of stocks featured in Cabot Dividend Investor, which I edit, click here.

Timothy Lutts

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Comments

  • Joseph H.

    Thank you Chloe, for an exceptional list! I’ve had great results with BR and GPN, and plan on looking at the others too. I recommend readers subscribe to your letter, I have had great results with the several Cabot letters I’ve gotten over the years. No sales pitch, just honest opinion. You guys are among the best there is!

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