You won't find a more popular measure of the stock market's health than the Dow Jones Industrials (DJINDICES:^DJI). With each of its 30 components holding a leadership position in their industries, many of the Dow's members are household names around the world.
Yet not every Dow stock is equal in the eyes of traders on Wall Street and elsewhere, as some stocks get a lot more trading activity on a daily basis. What's surprising is that some of the least popular stocks among traders have actually produced the best returns. Let's look at four Dow stocks with lowest trading volume that have nevertheless crushed the Dow's return.
Most unpopular: Travelers
Insurance giant Travelers (NYSE:TRV) has the lowest average daily trading volume of any Dow stock, at just 1.45 million shares. The company has a fairly high share price, but even so, no other Dow member has a smaller dollar volume than Travelers.
Yet over the past five years, Travelers has produced a 150% total return, beating the Dow's return over that period by about two-and-a-half times. One big reason is that back in 2008, Travelers and the rest of the financial industry was dealing with the full brunt of the financial crisis. The cash crunch threatened the capital markets and made it difficult to predict how Travelers could manage its investment portfolio to pay claims. Yet the company has weathered several bad storms since, and a relatively quiet year so far in 2013 has helped the stock hit new highs.
How 3M got its groove back
3M (NYSE:MMM) is the next least-traded stock in the Dow, with just about 2 million shares trading daily. It has a triple-digit share price, which depresses volume somewhat. Its gains haven't been quite as strong as Travelers, but its 112% total gain since 2008 almost doubles the Dow's return.
3M is best known for its consumer products, but the company is actually a huge conglomerate and has been finding growth from its core industrial business recently. A sharp ramp-up in activity in the aerospace industry could further improve 3M's prospects, as it produces abrasives, tapes, and glues that are essential for aircraft to function properly. In addition to substantial presence in renewable energy, 3M is involved in the right niche industries to drive future growth.
Flying higher with United Tech
United Technologies (NYSE:UTX) is in much the same situation as 3M, trading just 2.11 million shares but carrying a triple-digit share price that in some ways discourages trading activity. Its 115% return over the past five years is similar to 3M's as well.
United Tech can point to the aerospace boom even more than 3M as a driver of growth. With the combination of its Pratt & Whitney and Goodrich businesses, United Tech has made a big bet on the future of the aerospace industry. At least so far, that bet is paying off, and even with some short-term threats related to the government shutdown and its defense business, any dip in the shares should be a good buying opportunity in the long haul.
A huge new Dow winner
Visa (NYSE:V) is the best performer on our list, producing total returns of almost 250% over the past five years. It only trades 2.34 million shares on average, making it the fifth least popular Dow stock after DuPont and the stocks mentioned above. Visa's share price is the most expensive of any Dow stock right now, which again perhaps explains its lack of popularity.
Visa's business, though, has been firing on all cylinders in recent years. Even at the depths of the 2008 financial crisis, Visa held its own quite well in comparison to many of its financial-sector peers, largely because it didn't bear any credit risk from its business model. With many parts of the world only having begun to tap electronic payments, Visa still has plenty of room to grow, and as it moves into mobile payments and other new areas, Visa should be able to remain a leader in its industry.
Making money is always popular
Many investors are averse to high share prices, but these high-priced stocks have produced some impressive returns. Looking where others fear to tread is often a smart investing strategy, and it has definitely worked for Dow investors lately.
Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter: @DanCaplinger. The Motley Fool recommends 3M and Visa and owns shares of Visa. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.