I don't know about you, but my mother always made me the guinea pig when it came to taste-testing her food for dinner parties.

I didn't mind helping my mother out. But when it comes to investing, it's smart to pick out companies whose leaders are willing to eat alongside me, as it were, by owning a big equity stake in the company. And I'm not talking about options, either. Managers who own real shares, right now, are more likely to have strong incentives to ensure the company remains on solid financial footing and maintains a proper strategic focus.

After all, some of the best companies in the world have historically exhibited high levels of insider ownership and strong, visionary leadership: Some of the more conspicuous successes include legends like Microsoft and Berkshire Hathaway (NYSE:BRK-A).

Actions speak louder than words, or so I hear
A CEO or CFO buying up shares clearly believes in the future of the company. (On the flip side, while selling is sometimes a negative signal, it could simply mean that the executives need a few bucks for personal expenses.)

Interestingly, insiders are the most bullish they've been since 1975, according to Liz Ann Sonders, chief investment strategist for Charles Schwab. Insiders are buying their companies' stocks at a pace "rarely seen in the past 40 years," Sonders said, indicating that some of the most in-the-know people believe their companies are undervalued.

To identify potentially rewarding stocks with huge insider stakes, I used the Motley Fool's CAPS screening tool to search for companies with:

  1. Insider ownership stake of 10% or greater.
  2. Minimum market cap of $500 million.
  3. CAPS rating of five stars, the highest possible.             

Voila! Here are some of the companies that popped out when I ran the screen today:


Market Cap

(in millions)

% Insider Ownership

Alliance Resource Partners (NASDAQ:ARLP)



Berkshire Hathaway



Integra LifeSciences (NASDAQ:IART)



Molina Healthcare (NYSE:MOH)



optionsXpress (NASDAQ:OXPS)



Sykes Enterprises (NASDAQ:SYKE)






Source: Motley Fool CAPS.

While sizable inside ownership can be an indicator that the company you're invested in is in good hands, it should be only one of the criteria you use to screen for winning stocks. Remain mindful of the stock's valuation, fundamentals, and growth prospects. And in this economic environment, pay special attention to the sectors in which the stock you're considering operates. Even managers who run their companies with the best of intentions can get bulldozed by macroeconomic forces.

If you're interested in seeing some other tasty stocks, check out Motley Fool CAPS today! Let the collective wisdom of our 125,000-member-strong investment community help you make better investing decisions.

Further Foolishness:

Jennifer Schonberger owns shares of Microsoft, but not any of the other companies mentioned in this article. Alliance Resource Partners LP is a Motley Fool Income Investor recommendation. Berkshire Hathaway is an Inside Value selection. optionsXpress, Integra LifeSciences, and Berkshire Hathaway are Stock Advisor selections. Charles Schwab is a Stock Advisor recommendation. The Fool owns shares of Berkshire Hathaway. The Motley Fool has a disclosure policy.