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 the business. Looking for high levels of insider ownership in particular makes sense for a few reasons:

  • Insiders have a better sense of the prospects for their business and industry, so a large ownership stake is often a very positive signal.

Partners or players?
After all, Bill Gates and Warren Buffett got where they are today by betting big on their own companies. By winning their bet, they've made millionaires out of thousands of investors in the process. In other words, their wealth has moved in direct proportion with that of their shareholders -- and it still does.

Conversely, management teams with little or no stake in the company -- aside from huge option packages and obscene salaries -- have an edge over smaller shareholders. As Fools are quick to point out, this advantage turns into excessive greed or even outright fraud way too often.   

High and inside
So, with our eyes fixed on the shareholder-focused, let's look at seven top stocks from our Motley Fool CAPS community. In addition to boasting insider ownership that exceeds 30%, these companies have received a four- or five-star rating (out of a possible five) in our database.



Key Shareholder   

CAPS Rating

Morningstar (NASDAQ:MORN)


Founder, chairman, and CEO




Member of the board


Elbit Systems (NASDAQ:ESLT)




Comtech Group (NASDAQ:COGO)


Founder, chairman, and CEO


Harte-Hanks (NYSE:HHS)




Scotts Miracle-Gro (NYSE:SMG)


Chairman and CEO


Simpson Manufacturing (NYSE:SSD)




Data from Yahoo! Finance 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 instead. With that said, Simpson Manufacturing seems like something worth looking into.  

Inside with the Simpsons     
Some of the biggest gains in the stock market come when a well-run, shareholder-friendly company goes on sale because of a distressing industry outlook. Simpson Manufacturing, a best-of-breed building-products maker that has seen its shares slip by more than 20% in the last year, could be one of those successful turnarounds. A quick glance at Simpson's ownership profile and historical financials shows some attractive bits of information. 

The company's biggest shareholder, Barclay Simpson, has also been its chairman since 1994. Since then, the company has grown earnings at an average rate of about 17% while posting consistent returns on equity in the mid- to high teens.

Of course, it's the current state of U.S. housing that has many investors spooked, and, to be fair, Simpson's recent results haven't been so hot. In the last quarter, sales declined 10% while net income dropped 31%.

But according to many in our CAPS community, Simpson's competitive advantages at home (building codes require its products in several states), coupled with attractive expansion opportunities abroad, will be more than enough to get it through the real estate storm -- making 2007 an opportune time to get in on the cheap. With an EV/EBITDA of around 7, a dividend yield of 1.20%, and an immaculate balance sheet with over $148 million in net cash, this is one insider-owned stock that you might want to check out on CAPS.

To get you started, here are three of the many helpful comments you'll find inside.

  • Fellow Fool and CAPS All-Star TMFBreakerTAllan: "Simpson has an unbelievable moat in its products -- it is not only the name brand in its field, it is almost universally required in building specifications and is named in building codes in Texas and California. It is about to undergo expansion into international markets. The stock was affected by the housing construction slowdowns and is likely to outperform in the next 3-5 years."

  • Another one of my colleagues, CAPS All-Star TMF Platoish1: "They are the leaders in their niches and continue to innovate with new product offerings. Construction slowdown will effect them to a certain degree, but probably not to the degree that the market has discounted. This is a strong niche business -- nice and boring with fragmented competition. I think Lynch would like them."

  • Finally, goalie37 sums it up with a concise pitch: "Great financials, nice moat with builders and building codes specifically requiring their products, lots of inside ownership, no share dilution, little debt."

Now get inside, Fool
Buying a stock means becoming a 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 increases dramatically.

To get the inside scoop on the ideas mentioned above, or to find even better stocks with high insider ownership, join Motley Fool CAPS today. It's 100% free.    

And for even more investing help, try out any of our newsletter services free for 30 days.

 Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Fool has a disclosure policy.