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 their business. Looking for high levels of insider ownership in particular makes sense for a few reasons:
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 bets, they've made millionaires out of thousands of investors in the process.
Conversely, management teams with little or no stake in their companies -- aside from huge options packages and obscene salaries -- have an inherent "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 five) in our database:
|
Company
|
Percent Owned by Insiders
|
Key Shareholder
|
CAPS Rating (out of 5)
|
|
Western Refining (:WNR)
|
60%
|
President/CEO
|
****
|
|
Albemarle (NYSE:ALB)
|
51%
|
Chairman
|
*****
|
|
Titanium Metals (NYSE:TIE)
|
46%
|
Chairman
|
*****
|
|
Ralph Lauren (NYSE:RL)
|
42%
|
Founder/Chairman/CEO
|
*****
|
|
SEI Investments (:SEIC)
|
40%
|
Chairman/CEO
|
*****
|
|
Leucadia National (NYSE:LUK)
|
24%
|
Chairman/CEO
|
*****
|
|
TD Ameritrade (NASDAQ:AMTD)
|
21%
|
Chairman
|
****
|
Data from Capital IQ, a division of Standard & Poor's, and Motley Fool CAPS.
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. With that said, Leucadia National looks like something worth peeking inside.
LUK-warm response
In all walks of life, there's often a pair of extraordinary talents who've teamed up to dominate their game. In crimefighting, there's Batman and Robin. In sports, there's Michael and Scottie. In the world of investing, there's Warren and Charlie, and, of course, the Fool's own Tom and David Gardner. But there's another investing duo who've been trouncing the market for decades, and you might never have heard of them: Leucadia National's Ian Cumming and Joseph Steinberg.
Just how dynamic a duo are they? Well, since they took over Leucadia's management duties three decades ago, the company's book value has grown at a whopping 20.8% compounded rate per year. Leucadia's stock, meanwhile, has delivered an annualized 25% over the last 29 years -- represented graphically, that's one sweet chart.
Any comparison against Mr. Market is laughable, so that's why Leucadia -- whose mishmash of businesses range from manufacturing and real estate to wineries and energy -- is often compared to Buffett's Berkshire Hathaway instead. In fact, many in CAPS believe that investing in the $7.7 billion Leucadia is like buying Berkshire in the '70s (back when it wasn't the $169 billion gorilla it is now). As an '80s child, I can't testify to that, but a quick glance at the two companies today shows some striking similarities.
Other than a bland-looking website, the most obvious trait that Leucadia shares with Berkshire is a strict, value-centric approach to investing. Cumming and Steinberg have built a reputation on buying troubled assets at discount prices, and then actively working to unlock their value. In Leucadia's annual letters (which are just as candid, educational, and easy to read as Berkshire's), Cumming and Steinberg outline the "Rules of the Road" guiding their acquisitions. The first and last rule? Don't overpay! In addition to this monk-like discipline, Cumming and Steinberg share the same ownership principles as Buffett, as evidenced by the large stake in their own company.
Of course, you'll have to decide for yourself whether these surface similarities to Berkshire are compelling enough to actually convince you to buy shares in Leucadia. But given the fact that Leucadia habitually falls on our list of "The Best Stocks Right Now," I'd say the idea is at least worth following -- something professional analysts don't do enough of with LUK.
Here's another dynamic duo (this time of CAPS All-Stars) who chime in with some thoughts:
-
onemoMF uses an interesting analogy to help us get our heads around Leucadia: "The (Wall Street) wise do not cover this stock, but I think it is a great private company mutual fund, with all the signature elements of a great mutual fund -- over-performance over the long haul, stable management, contrarian investing style."
- And rwadington leaves us with a bold statement to consider: "Similar to Berkshire Hathaway, only better! This stock has been an outstanding performer for the past ten years and is showing no signs of stopping now. Huge insider ownership as well. Buy with confidence."
Now get inside, Fool
Buying a stock means becoming 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 increase dramatically. Remember: 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:
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Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Fool has a disclosure policy.
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