When investing my own money, I learned a long time ago that there’s a clear distinction between the company itself and the ticker that represents a single share of the said company.

So when I read the Australian Securities Exchange (ASX) trading statistics which includes, among others things, ASX trading volumes I tend to cringe somewhat.

I guess there are good reasons for the publication of this data, but to retail investors, I hardly see its relevance.

The volume of shares traded, or the number of trades that occur each day on any particular stock, of course, indicates liquidity and the ability of investors to get in and out of a position easily without affecting the integrity of the share price.

However, there are absolutely no insights to be obtained from market data on the worthiness of a particular company for investment, in my view.

To test stock popularity and business quality, I thought I’d look at the top three shares by number of trades (as opposed to volume of shares traded).

To illustrate the distinction, 31,490,071 shares were bought and sold in Fortescue Metals Group Limited (ASX: FMG) last Friday, but these volumes occurred in only 9,307 separate trades.

Here are the top three stocks on the ASX by number of trades last Friday, 29 July 2016:

Newcrest Mining Limited (ASX: NCM)

Gold priced in Australian dollars has had a stellar run in the last two years rising from under A$1,350/oz in late 2014 to just under A$1,800/oz today.

Naturally, the Newcrest share price has followed. Although its low point preceded the bottoming of the Australian dollar gold price by a year or so, it’s proved to be a profitable trade for those who got in at $6.96 (or thereabouts) in late 2013 to watch the price sail north to exactly $25 today.

Last Friday, Newcrest’s shares proved to be Australia’s most popular stock with 19,084 trades taking place.

In the shorter-term, I expect the share price to continue rising given a forecast increase in earnings of around 22% in the next year or so, continued upward momentum in the US$ gold price, downward pressure on interest rates and a potential continuation of the fall in the Australian dollar.

Longer-term, this is a mediocre business which has provided shareholders with low single-digit returns over the last decade, so I’d avoid this one if you want a place to park your funds over a period of greater than five years.

Macquarie Group Ltd (ASX: MQG)

17,500 shares were traded last Friday in this investment bank/fund manager.

I think Macquarie’s business model has improved a lot since the GFC and its earnings now are more stable due a change in strategy towards funds management. It’s a big top-20 stock with many investors perhaps seeing potential opportunity around the $60 mark.

It’s impossible to predict where its share price will go next, but given its earnings are forecast to fall by 2%, the only catalyst to send the share price higher would be a resounding ‘beat’ in the numbers expected of analysts.

The business quality is okay but I’d wait until after it reports its interim financial results in October before jumping in and buying the stock.

Westpac Banking Corp (ASX: WBC)

I think there are just too many headwinds for the domestic retail banks in general, given slowing growth, higher capital-adequacy requirements by regulators, and perhaps an under-provisioning for bad and doubtful debts.

Westpac has also been Australia’s best performer of the big four banks since the GFC and for this reason, I’d be hesitant in starting a position today.

16,245 separate trades took place last Friday making it the third most popular stock for buying or selling. This doesn’t mean you should go out and buy some tomorrow though.

A quality business, but it is still overvalued given the low-growth environment it finds itself in.

Foolish takeaway

It’s a stretch to suggest there’s a relationship between what shareholders do on-market and whether a particular stock should be purchased (or sold).

Some investors (traders actually) do look at the share trading statistics to determine what and when to buy, but they’re basing their decisions purely on price action rather than the worthiness of the underlying business.

This is a completely different approach to that espoused and practiced by Motley Fool members, but good luck to anyone who approaches the market with a trader’s mentality. It’s just not my cup of tea.

I’ll personally continue to stick to the tried-and-tested approach of looking for shares based on company fundamentals rather than because of some share-price action in the underlying securities market.

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Motley Fool contributor Edward Vesely has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not 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. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.