Widely Held Stocks in Context

If you think that the most widely held companies in America also rank among the nation's best-performing stocks, think again.

Here's a quick look at some of the United States' most popular stock holdings, courtesy of CNN:

I'm actually a minor (but longtime) shareholder in Time Warner, and I can tell you that it sure hasn't made many people rich lately. The company trades at roughly the same price it did five years ago, and it's down 60% or more from its levels in 1999, 2000, and 2001. Pfizer has been cut by about a third over the past decade, and Alcatel-Lucent's past few years have also not been pretty.

So why are so many Americans hanging on to these stocks? Well, some are indeed long-term winners. Some may not have skyrocketed in a long time, but they've paid out generous dividends for many years.

I also suspect that simple inertia is at work here. If you inherited stock from your granddad, there's a good chance you'll just leave it alone. Many people put off dealing with their finances for a long time. And many people sitting on losses tend to wait for recoveries, when they may be better off moving their remaining dollars into holdings in which they have more confidence.

Remember that the largest companies tend to have the most widely held stocks. There's a reason for that. Small companies just don't have enough shares to go around for so many investors -- even though they hold great potential for growth. The S&P 500 collectively makes up 75% of the overall stock market's value, while the other several thousand companies total less than 25%.

So next time you see a list of widely held stocks, don't pay too much attention -- just give it a quick look to see whether any long-time poor performers have fallen off it. Perhaps over time, more investors will decide to leave the herd behind, seeking greener pastures.