Some shareholder-friendly stocks get the market's cold shoulder. And some high-flying stock successes pay little heed to their owners' interests. But in the happy medium between them, you'll find top-flight companies that also treat their shareholders with respect.
Institutional Shareholder Services -- the big name in corporate proxies -- measures how well a company performs in as many as 63 categories covering four broad areas. Each company is scored relative to its market index and industry group. ISS assigns each stock a rating that it calls its corporate governance quotient, or CGQ.
Some evidence supports the notion that companies with weaker governance have higher risk, decreased profitability, and lower valuations. We'll be looking at stocks that Motley Fool CAPS investors have marked to outperform the market, and which also sport above-average CGQ scores, either in their index group or among industry peers.
|
Company
|
CAPS Rating (out of 5)
|
Index CGQ Ranking*
|
Industry CGQ Ranking*
|
|
American Capital (Nasdaq: ACAS )
|
****
|
60.3%
|
91.6%
|
|
Couer D'Alene Mines (NYSE: CDE )
|
****
|
76.2%
|
59.1%
|
|
Healthways (Nasdaq: HWAY )
|
****
|
64.5%
|
81.4%
|
|
Huntsman (NYSE: HUN )
|
*****
|
82.3%
|
67.2%
|
|
InterDigital (Nasdaq: IDCC )
|
****
|
58.2%
|
66%
|
Sources: Yahoo! Finance, Motley Fool CAPS.
*Relative placement when compared with companies in index or industry. Higher is better.
Although finding good companies and holding them for the long term is one of the greatest secrets to investing success, there are many other factors to consider. How well a company treats shareholders shouldn't be least among them. Consider these rankings one way to gauge how these businesses stack up against one another relative to their shareholder policies.
Go to the head of the class
The likelihood that our deepening federal debt could lead to economic wreckage might at least be a long-term plus for precious metals. Silver has been enjoying strong support lately, though it's starting to show some stress fractures from its status as both a precious metal and an industrial commodity. Economic weakness could undermine miners like Coeur D'Alene Mines, but the boost it would get from a flight to safety might be enough to override those concerns.
Unless someone installs an auto-shutoff switch on the U.S. Mint's runaway printing presses, however, CAPS member PorterPerspectiv figures Coeur D'Alene will be an easy-to-understand beneficiary:
The gov't likes to print money and then buy it's own T-bills. This practice can lead to inflation. The gov't will also have to contribute more to their defined benefit plans now that they have a decreased funding levels. With American's tax complex, we will not favor new taxes to take care of plan assets for gov't employees. Hedging inflation with precious metals and those who produce precious metals is a conservative long term strategy. Coeur d'Alene Mines uses simple to understand GAAP financials and owns some of the best and largest mines around the world. The drawback on CDE is that they have used derivatives for debt purposes.
Other players like Silver Wheaton (NYSE: SLW ) , which has cemented exceptionally low prices for silver through long-term contracts, and a newly cash-flush Hecla Mining (NYSE: HL ) , would undoubtedly benefit as well. Yet Couer D'Alene has struck the richest vein among the silver stocks, rising 10% over the past month. It's also handily outperforming the CAPS Metals & Mining sector, which has risen barely 3% over the same time period.
A Foolish quotient
Many factors help determine whether a stock is a buy or a sell. Do corporate governance policies enter into your equation? It pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made -- all from a stock's CAPS page.
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