7 Top Insider-Owned Stocks

Successful investing is about concentrating on the factors that really count.

For us Fools, few things are more important than finding honest management teams with a whole lot -- their reputations, their careers, and, preferably, a whole boatload of common stock -- riding on the success of the business. Looking for high levels of insider ownership makes sense for a few reasons:

• Founders and managers who "eat their own cooking" are inherently motivated to act in the best interests of the company.

• Insiders have a better sense of the prospects for their business and industry, so a high ownership stake is often a very positive signal.

• Portfolios with a high average of insider ownership outperform the market over long periods of time.

Partners for profit
After all, billionaires like Bill Gates and Warren Buffett got where they are today by betting on their own companies. And by winning their bet, they've made millionaires out of thousands of investors in the process.

Conversely, management teams with little or no stake in the company -- aside from huge option packages and obscene salaries -- can seek to obtain an edge over smaller shareholders. As Fools are quick to point out, this advantage turns into excessive greed way too often.   

High and inside
So, with the goal of finding real insider-partners to go into business with, here are seven top stocks from our Motley Fool CAPS community. In addition to having insider ownership that exceeds 20%, these stocks have received a four- or five-star rating (out of a possible five) in our database:

As always, don't view these stocks as formal recommendations. There are still plenty of risks involved with heavy insider ownership -- like the relative inability of outside, dissident shareholders to spur changes -- so due diligence is very much required.

The CAPS stock rating represents the collective wisdom of more than 50,000 community members, so think of it as a great place to begin your stock research, instead. With that said, Rohm and Haas looks like something worth peeking inside.  

Rohming the salty streets
There's nothing quite like combining a consistent, cash-generating snoozer of a business with strong insider ownership. That way, investors actually stand a chance of having their free cash being used properly -- whether through dividends, share repurchases, or other value-creating investments. Rohm and Haas, one of the world's largest specialty chemical companies, has been a pretty solid and shareholder-friendly company over the years. Of course, when you consider that the Haas family still owns nearly a third of the company, while the members of the board of directors are also required to own a significant amount of stock, it's easy to understand why.

Some of the company's recent moves include a 12% increase in dividend payout -- marking nearly three straight decades of double-digit dividend growth -- and a $1 billion buyback program, which should be completed soon. I guess when you stand to benefit, voting for things such as dividend increases and share repurchases isn't so tough to do.

Operationally, the company's paint-and-coatings segment has been hurt by the real estate slowdown here at home. But according to many in our CAPS community, Rohm's diversified revenue stream, led by the well-known Morton Salt brand, coupled with strong performance in international markets, should compensate well for the domestic downturn -- possibly making today's prices a good place to jump in. With an EV/EBITDA ratio of less than 9, a dividend yield of 2.8%, and the healthiest balance sheet Rohm had in a long time, this is one insider-owned stock that you might want to check out on CAPS.

Now, if none of that piques your interest, know that All-Star firms Banc of America Securities, Lehman Brothers, and, most recently, Matrix Research -- whose real-world calls we're tracking on CAPS -- have all placed outperform calls on Rohm. From our pool of individual Fools, each one of the 25 All-Stars who've rated Rohm also like it to trounce the market.

For color, here are three players who paint a pretty picture:

• All the way back in September, muzzybelly wondered why investors weren't paying more attention to the consistent dividend-payer. Mr. Market listened. Rohm's shares are up more than 15% since the pitch: "How does everyone miss this stock? Major chemical company, consistent growth, nice dividend, good well diversified product line, solid financials, and a cheap price."
  
  
• CAPS All-Star jcnm, meanwhile, points to Rohm's stable nature and potential source of growth as his reasons for being bullish: "Salt business is a strong earner for ROH, stable reserves of +100 years, little competition in the marketplace, & very little fluctuation in sales based on the economy. New wood treatment venture with CSI may prove to give the company a boost in earnings in the next couple of years."
  
  
• Finally, CAPS All-Star rmenschel sums it up with a concise pitch: "Top margins, great returns, low debt, and better than avg. growth. ... Basic FCF is healthy. Insider ownership (above) 30%."

Now get inside, Fool
Buying a stock means becoming a part-owner of that business. When the people you've essentially hired to run your company are also owners, the odds of profiting from their decisions increases dramatically. Finding dedicated partners is still the secret to outsized returns.

To get the inside scoop on the ideas mentioned above, or to find even more stocks with high insider ownership, join Motley Fool CAPS today. It's 100% free.

For more inside looks at CAPS:

• 6 More Stocks for Fast Cash
• 3 More Undiscovered Growth Stocks
• 5 Dynamic Dividend Stocks

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Fool has a disclosure policy.