5 Stocks the Insiders Are Holding

You might not buy an iPhone if you saw Steve Jobs using a BlackBerry. I don't think Chuck Norris would sell many Total Gyms if we caught him using a Bowflex. Consumers expect product loyalty from public promoters, and Foolish investors know to look at the insider ownership of a company's stock in the very same way.

The innovative stock screening tool at Motley Fool CAPS offers an intriguing way to identify stocks that are as popular with company insiders as they are with the members of the CAPS community. In this case, I screened for companies with the following characteristics:

  • A market capitalization above $1 billion
  • At least a four-star CAPS rating out of a possible five
  • At least 100 outperform picks
  • 20% or more ownership by insiders.

Below is a sampling of the stocks returned by the screen:

Name

Insider Stake

TTM Return on Equity

Dividend Yield

CAPS Rating

Marvel Entertainment (NYSE: MVL  )

37.6%

58.1%

NA

*****

Navios Maritime Holdings (NYSE: NM  )

21.9%

51.9%

2.1%

*****

Garmin (Nasdaq: GRMN  )

34.8%

41.5%

1.6%

****

Oracle (Nasdaq: ORCL  )

22.8%

27.8%

NA

****

Enterprise Products Partners (NYSE: EPD  )

34.1%

10.8%

6.6%

*****

Data from Motley Fool CAPS, Yahoo! Finance, and Capital IQ, a division of Standard & Poor's.
TTM = trailing 12 months.

Management with an ironclad record
With a whopping 58.1% return on equity, Marvel exemplifies the benefit of considering stocks that insiders own. CEO Isaac Perlmutter, Marvel's top "Iron Man" if you will, owns more than 36% of the company. That provides a really strong incentive for him to ensure a solid return on his (and therefore your) investment.

Throw in the company's proven track record for producing epic-hero flicks with broad-based popular appeal -- including its first self-produced movie, the wildly successful Iron Man -- and you have the potential for a winning combination.

CAPS All-Star shop1, with a 99.06 rating, thinks Iron Man might be just a taste of things to come from the corporate king of comic book icons:

Although Marvel is trading near its 52 week high, it is with good reason. Its recent movie, Iron Man, has done very well in theatres and has prompted Marvel to raise its 2008 guidance. Marvel has a proprietary library of over 5,000 characters, which gives the company a [depth] of choices for future films, licensing, publishing and toys. ... Marvel appears to be a great long-term investment, perhaps the disney of the Y generation.

Partners in success
Enterprise Products Partners (EPP) has its own "Iron Man" in Dan L. Duncan. He is the chairman and director of Enterprise Products GP, the general partner responsible for the running of EPP. He also owns just shy of 34% of EPP.

The company provides midstream services to the natural gas and oil industries, including pipelines and storage facilities. Domestic natural gas producers are scrambling to ramp up production to meet rising demand, and companies like Enterprise and Spectra Energy (NYSE: SE  ) are expanding pipelines all the way to the bank.

CAPS All-Star NetscribeEnergy, sporting a CAPS score of 99.32, liked what it saw last April:

Good times ahead for Enterprise Products Partners L.P. ... The company reported record revenues of 14 billion and 43% increase in net income to $601 million, and announced its plan to spend another $1.7 billion in 2007 for projects in the Gulf of Mexico and Texas. The company plans to finance this by spinning-off certain mature assets to its newly listed subsidiary i.e. Duncan Energy Partners and thus help [Enterprise Products Partners] to maintain the ownership of the assets. With record revenues, organic and earnings expansion projects, and intact industry growth, [Enterprise Products Partners] is all set to deliver good returns.

Although Enterprise Products might not offer a return on equity as heroic as Marvel's, the 6.6% dividend yield is a compelling enticement all its own, and Duncan's level of ownership suggests that he will be inclined to protect that yield on your (and his) behalf.

What can you do?
That's the beauty of the CAPS screening tool. You'll have fun dreaming up creative ways to combine search criteria to locate all the stocks you never knew you were looking for. Once you have your starting list, CAPS offers a world of opportunities for completing the necessary due diligence.

If you're looking for partners in your quest for solid returns, consider some of the companies that turned up in this CAPS screen for insider holdings, or run your own screen. Signing up is free.

Enterprise Products is a Motley Fool Income Investor pick. Garmin is a pick of both the Stock Advisor and Global Gains newsletters. Marvel Entertainment is also a Stock Advisor pick. Sample any of the Fool's investing newsletters free for 30 days.

Fool contributor Christopher Barker captains yachts and writes about stocks. He can be found acting Foolishly within the CAPS community under the username TMFSinchiruna. He owns no shares in the companies mentioned. The Motley Fool has a disclosure policy.


Read/Post Comments (1) | Recommend This Article (21)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 11, 2008, at 3:19 PM, weiwentg wrote:

    Dan Duncan also controls Enterprise GP Holdings (EPE). It's the general partner for EPD. The company has also bought the entire GP stake for Teppco (TPP) and a 17.6% stake in Energy Transfer Equity (ETE), the publicly traded GP for Energy Transfer Partners (ETP). All three partnerships control high quality assets and have reached the high splits, where half of every incremental dollar of cash flow goes to the GP as incentive distributions. As a result, EPE should be able to ramp its distributions up very rapidly in the coming years. Right now, EPE has sold off to the point where it's yielding over 10%, more than EPD at the time the article above was written. EPE also increased its distribution this year and suffered little hurricane damage.

Add your comment.

DocumentId: 653447, ~/Articles/ArticleHandler.aspx, 7/31/2014 3:40:47 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement