High insider ownership is often a sign of a great investment. If a company's leaders are putting serious cash into the business by owning a big chunk of shares, they probably believe in the stock's long-term value -- and will align their business strategies with the best interests of shareholders.
Only seven of the 30 Dow Jones Industrial Average (DJINDICES: ^DJI ) member stocks have more than 1% of their shares in insiders' hands. But when it snows, it's a blizzard. Say hello to Nike (NYSE: NKE ) Chairman and co-founder Phil Knight, who owns a stunning 19.5% of Nike stock all by himself.
Knight's Nike shares aren't the same as the Class B shares you might buy on the open market. The bulk of his Nike holdings are in the form of Class A shares, a special ownership class that directly elects three-quarters of Nike's board of directors without giving Class B owners a say in the matter.
Knight owns just 15,480 Class B shares, but also 97% of the 178 million Class A stubs. Each Class A share is convertible into a single common Class B share at will, so Knight could go this way if he ever wanted to liquidate his controlling position.
This extreme insider position might be off-putting to some investors. But Phil Knight isn't some greedy micromanager coming into Nike with self-serving profits on his mind.
He started the company to meet the needs of actual athletes -- like himself, a just-graduated varsity middle distance runner for the University of Oregon Ducks. Knight has taken Nike from selling shoes out of his green Plymouth at local track meets to a dominating brand with a $$66 billion market cap and $26 billion in annual sales. Nike became a member of the Dow's hallowed halls last year -- all under Knight's guidance.
This is the kind of long-term manager you should actually root for owning a massive chunk of his own company. Knight is a proven winner and successful business developer, and exactly the guy you'd want on your side when owning a consumer-focused stock such as Nike.
Knight's large position was a key consideration when Tom Gardner recommended Nike to Motley Fool Stock Advisor subscribers four years ago. The stock has more than doubled since then, beating the market by 43%. This insider-owned Dow stock has served Tom Gardner's followers very well.
Are there more long-term home runs like Nike in this crazy market?
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