OBTAINING UNLISTED STOCKS CAN BE DIFFICULT, REWARDING.

Byline: Larry Bauman Dow Jones News Service

As far as Wall Street is concerned, there are two types of companies - publicly traded and privately held.

But somewhere in between, somewhere north of the so-called ``pink sheet'' speculative stocks, is a small group of well-capitalized and long-successful companies like map maker Rand McNally whose stocks are controlled by a small number of investors loath to sell at any price.

Stocks traded on ``bulletin boards'' and ``pink sheets'' tend to be highly speculative, extremely small capitalization issues that trade for as little as a few cents a share, usually for good reason.

These unlisted stocks are extremely illiquid - some can go months without trading hands - and would-be investors must wait in line for the opportunity to buy any shares that might become available. Because they're so thinly traded, their share prices are insulated from the stock market's short-term volatility, and because it is virtually impossible for an investor to mount a takeover move, their valuations are significantly lower than similarly listed stocks, with many trading below their book values.

There are about 1.1 million shares of map maker Rand McNally & Co. outstanding. They last traded at $345 a share, the same price at which the stock closed in 1995, but up from the Dec. 31, 1994, price of $154.

At $32,500 a share, Berkshire Hathaway Inc. is the most expensive stock traded on the New York Stock Exchange. But shares of Kohler Co., the plumbing-fixture company, last changed hands for $120,000 a share, which is up 25 percent from its price at the end of 1994.

Companies whose stocks are traded on the major exchanges must comply with countless Securities and Exchange Commission disclosure requirements. But companies whose stocks are held by fewer than 500 shareholders are exempt from most of the SEC's regulations about disclosing information to the public or their shareholders.

The main reason a company goes public is to attract capital. But the large unlisted companies generally ``are not looking for additional financing,'' said Harry Eisenberg, publisher of Walker's Manual of Unlisted Stocks.

Not only are these unlisted companies not seeking additional capital, but many of them, especially those controlled by family members, also ``are not interested in maximizing shareholder value, especially for estate reasons,'' Eisenberg said.

Making a company public, at least nominally, ``helps a family pass the company on to its heirs.'' Rand McNally, he said, is a prime example of a family-controlled unlisted company.

Large unlisted stocks are typically priced well below their book value and trade at a fraction of the valuations awarded most traditionally traded equities.

``These stocks trade at about 50 percent of book value,'' compared with a more typical valuation of four to five times book value, said Jeff Herr, who trades unlisted stocks at Chicago Corp. While listed stocks trade, in general, at about 17 to 20 times earnings, Herr said, the price-earnings ratio for the unlisted stocks in which he makes markets is likely to be five to eight times earnings.

``Many of these companies would just as soon see lower valuations than high,'' Eisenberg said.

While it requires a lot of patience, owning unlisted stocks can be rewarding.

Walker's Index of Thinly-Traded Stocks, or Witts, a 30-stock index of unlisted stocks compiled by the publishers of the Walker's manual, rose 133.6 percent from December 1992 to August 1996, outpacing the 70.1 percent gain of the Dow Jones Industrial Average and the 49.6 percent rise of the Standard & Poor's 500-stock index. For 1996, through August, Witts jumped 14.7 percent, while the DJIA was up 9.7 percent, and the S&P gained 5.9 percent.

High returns at a low price. So why aren't more investors interested in the niche?

``The biggest problem is trying to buy the stocks,'' which, by their nature, rarely become available, Herr said.

``They trade by invitation only,'' said John Browning, a broker at Carr Securities. ``These stocks only show up when somebody dies.''