Please ensure Javascript is enabled for purposes of website accessibility

Do These Stocks Deserve Your Support?

By Rich Duprey - Updated Apr 5, 2017 at 7:01PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shareholder friendly stocks that have been marked to underperform the market.

In the wake of the scandals that ruined investors in Enron and WorldCom and the options backdating fiasco, "corporate governance" became the watch-phrase of the new millennium and a whole cottage industry of rating management was born.

Some evidence supports the notion that companies with stronger governance have lower risk, increased profitability, and higher valuations. Which means companies with poor corporate governance could be targeted by shareholder activists, hedge funds, or short-sellers. In short, they could be ripe for a fall.

Below, we look at stocks that are marked to underperform the market by investors on Motley Fool CAPS, but sport above average Corporate Governance Quotients (CGQs). Developed by proxy service Institutional Shareholder Services, a company's CGQ measures how well it performs in up to 63 categories. Each company is scored relative to its market index and to its industry group.

Here are the five that I'm highlighting today:


CAPS Rating (out of 5)

Index CGQ^

Industry CGQ^

Ameren (NYSE:AEE)




Life Time Fitness (NYSE:LTM)




Ryder (NYSE:R)




Strayer Education (NASDAQ:STRA)




Teradyne (NYSE:TER)




 Source: Yahoo! Finance, Motley Fool CAPS.
^ Higher is better.

Although there are many factors that an investor should consider before buying a stock, how well it 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.

Downturn in chips
When chip makers like Intel (NASDAQ:INTC) sailed into stormy seas and cut sales forecasts for the fourth quarter, it was just a matter of time before the companies that test the chips that Intel and Advanced Micro Devices (NYSE:AMD) make had to take dramatic action, too. Teradyne, the world's leading manufacturer of chip-testing equipment, announced that it was laying off 5% of its workforce, managers will take pay cuts, and all employees would be furloughed over the weeks of Thanksgiving, Christmas, and New Year's Day.

Tough times, indeed -- something which CAPS member alvojiggy1 had suggested back in October would work against Teradyne, although he remains optimistic overall:

Expected EPS growth for next fiscal year is positive. S&P rating is 4 to 5 stars. Debt to capitalization is less than 5%. EPS share growth and effect on the multiple of the stock is postive, hence it's PEG ratio is low. Stock has been beaten to a pulp far more than the stock should be worth. ... The company however is in an unfavorable sector at the moment which could work against them.

A utility player
There was a time when utility stocks were seen as "widows and orphans" investments, companies so solid that they could be recommended to even the most vulnerable of investors. Today's markets are a different world, and even utilities can suffer from shocks and volatility. Ameren is a Midwest-based utility that's found the current credit crisis a cause for concern. So it's cutting $1 billion from its budget in an effort to shore up its cash reserves and bolster its credit standing.

While Ameren is seeking to delay some environmental projects, CAPS member greglpc1 feels that the projects Ameren moves ahead with will generate enough positive sentiment that the public won't balk at future rate increases. As a relatively low-cost energy producer, that ultimately helps its bottom line:

Getting approvals for an additional nuclear facility at its Callaway nuclear power plant site. The community is behind this decision. The company is spending to make its coal facilities pollution free and the community is behind this too. It makes for an easier sell when the Company can show that the extra charges have gone into "feel-good" projects and the lights stay on! These guys know what they are doing and are making money at it. Also, AEE is one of lowest cost utilities in the country. So that leaves plenty of upside sell room if rate increases are needed.

A Foolish quotient
There are many factors that go into whether a stock is a buy or sell, and 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. Head over to CAPS today and share your thoughts with other investor-analysts on whether you think these stocks make the grade.

Intel is a Motley Fool Inside Value newsletter recommendation. The Fool owns shares and covered calls in Intel. Try any of our Foolish newsletters today, free for 30 days. There's no obligation to subscribe.

Fool contributor Rich Duprey also owns shares of and has options in Intel, but does not have a financial position in any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool's disclosure policy is so hungry it could eat a pterodactyl.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Intel Corporation Stock Quote
Intel Corporation
$36.11 (1.46%) $0.52
Advanced Micro Devices, Inc. Stock Quote
Advanced Micro Devices, Inc.
$100.83 (2.76%) $2.71
Ameren Corporation Stock Quote
Ameren Corporation
$94.83 (0.85%) $0.80
Teradyne, Inc. Stock Quote
Teradyne, Inc.
$104.34 (4.44%) $4.44
Strayer Education, Inc. Stock Quote
Strayer Education, Inc.
$69.55 (2.57%) $1.74
Ryder System, Inc. Stock Quote
Ryder System, Inc.
$83.00 (0.33%) $0.27

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/13/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.