Some shareholder-friendly stocks consistently underperform the market, and some highfliers pay little heed to their owners' interests. 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 also scored relative to its market index and its industry group. ISS then assigns the stocks a rating that it calls the 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 that 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*
|
|
Arch Coal (NYSE: ACI )
|
*****
|
60.1%
|
81.6%
|
|
CapitalSource (NYSE: CSE )
|
*****
|
66.6%
|
76.5%
|
|
ConocoPhillips (NYSE: COP )
|
*****
|
53.8%
|
92.1%
|
|
Raytheon (NYSE: RTN )
|
****
|
50.3%
|
87.9%
|
|
Spectrum Pharmaceuticals (Nasdaq: SPPI )
|
****
|
58.1%
|
62.3%
|
Source: 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 success in investing, there are many factors an investor should consider, and how well a company treats shareholders shouldn't be least among them. View these rankings as a way to gauge how these businesses stack up against one another relative to their shareholder policies.
Go to the head of the class
Is marriage in the air? Stock discussion boards have been abuzz for months now with rumors that Spectrum Pharmaceuticals is headed to the altar. There are plenty of potential suitors for the pharmaceutical business, including:
- Bayer Schering, which markets Spectrum's non-Hodgkin's lymphoma treatment Zevalin outside the U.S.
- Bristol-Myers Squibb (NYSE: BMY ) , which at least one analyst has speculated might be interested in making a bid, if Spectrum is successful in marketing Zevalin.
- Allergan, which has an exclusive collaboration agreement with Spectrum to develop EOquin, a bladder cancer therapy.
Yet there's plenty of reason to consider Spectrum as investment on its own merits, without resorting to rumor and innuendo. It expects to get FDA approval by Monday on its application to expand Zevalin beyond its use as a secondary treatment for relapsed or refractory non-Hodgkin's lymphoma. Getting the green light for use as a first-line treatment -- an approval it already has in the Europe Union -- will allow Zevalin to be prescribed right after a patient responds positively to chemotherapy.
Spectrum's expected to follow that news with positive tidings from the FDA next month on Spectrum's application for using Fusilev as a treatment for advanced metastatic colorectal cancer. For its EOquin drug, the company wants, by year's end, to complete enrollment in phase 3 trials, initiate trials for BCG-Failure bladder cancer, and sign up a partner in Asia. Last month, it also acquired all the rights to RenaZorb, a drug candidate with the potential to reduce dosage burden for patients with chronic kidney disease.
That's plenty for one company to handle without throwing merger talks into the mix. CAPS member Cencewolf likes Spectrum precisely because it has all those irons in the fire:
good company (more importantly good catalysts in the near future) featuring a major profit making possibility. this is a great long wager, but an even better mid term one.
No assurances for Arch
Despite posting a $15 million loss in the second quarter, as it realized lower prices on its Powder River Basin and Central Appalachian assets, Arch Coal think its business has gone as low as it will. The company hopes that things will turn up in the second half, and it's completed a number of recent actions that will affect its ongoing operations.
Arch recently received clearance from the FTC to complete its purchase of the Jacobs Ranch coal mine from Rio Tinto (NYSE: RTP ) . The Wyoming-based mine produced 42 million tons of sub-bituminous coal for power companies last year. Arch expects to produce 116 million to 120 million tons of coal this year from all of its properties, making it one of world's largest coal producers. It was also able to amend its credit facility to give it as much as $60 million in additional financing.
With few practical energy alternatives for oil, CAPS member SalohcinRacc sees Arch Coal well positioned to capitalize on the situation: "Coal--strong coal lobby, large coal reserves, currently only feasable alternative to oil."
A Foolish quotient
Many factors go into 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.
RSS Headlines
Fool UK