The flip side to shareholder-friendly stocks expected to underperform the market? Highfliers that pay little heed to their owners' interests. But what about 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. Each company is scored relative to its market index and its industry group. It assigns the stocks a rating called a Corporate Governance Quotient, or CGQ.
Some evidence supports the notion that companies with weaker governance have higher risk, decreased profitability, and lower valuations. But we'll be looking at stocks that Motley Fool CAPS investors have marked to outperform the market and also sport above-average CGQ scores.
|
Company |
(5 max) |
Index CGQ Ranking^ |
Industry CGQ Ranking^ |
|---|---|---|---|
|
Allegheny Technologies |
**** |
62.8% |
91.9% |
|
Denbury Resources |
**** |
55.2% |
85.3% |
|
Disney |
**** |
98.1% |
100.0% |
|
Global Industries |
**** |
94.8% |
90.2% |
|
Graham |
**** |
70.3% |
63.2% |
Source: Yahoo! Finance, Motley Fool CAPS.
^ Relative placement when compared to 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, there are many factors that 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
While consumers have been enjoying the decline in oil and natural gas prices, they're still high enough that Denbury Resources was able to report another quarter of growing profits. The all-star stock uses its massive CO2 fields to help extract oil from its Gulf Coast properties. In the face of the volatile markets, the company has decided to concentrate on developing a new CO2 pipeline that is expected to help the company benefit from any future price increases.
The unique method of extraction has attracted CAPS members like MystixX:
Great new way of extracting more oil in the US, already making good revenues, poised to really succeed with the commodities coming back up, especially at this price
When it comes to Disney, it seems investors fall into two camps. The bears look at the theme park business and see the economic slowdown hurting it, much as Cedar Fair
This stock is largely dependent on consumer spending, and there isn't a lot of that going on now. I can't imagine joe and jane smith dropping two grand this christmas on a trip to disney.
Bulls, on the other hand, seem to focus on the movie side of things and get pretty animated at the potential. For instance, a successful string of movies has helped DreamWorks Animation
The time is right to pick up some of the mouse. If you look back about 8 to 10 years and you compare that Disney to today's version I believe this business has gotten much stronger. The leadership team, which is led by Iger is much better. Creativity is flourishing again thanks to the acquisition of Pixar and John Lassiter. Their EPS has increased from $0.56 to $2.25 in 2007. Their revenues have increased from $25 billion to $35 billion. Their shares outstanding has decreased slightly. All this and the stock price has moved down from $38/share to around $22 today. I think it's more than a fair price for this iconic brand.
A Foolish quotient
Many factors go into whether a stock is a buy or sell, but do corporate governance policies enter into your equation? They should. 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.
