Tuition to the School for Smart Shareholders comes free with the purchase of stock in any company. Students must provide an unflagging curiosity about what's going on with their money, along with a practiced "harrumph."
Homework assignment No. 1: Memorize this Peter Lynch quote: "A share is not a lottery ticket ... it's part-ownership of a business."
Homework assignment No. 2: Check out the annual 10-K report your company files with the SEC. It includes business summaries, financial figures, and management's outlook. If the 10-K reads like Greek to you, you might reconsider whether you want to own shares of a venture that makes money in ways you don't understand.
For instance, tech companies bewilder me. But when I learned that Tootsie Roll (NYSE:TR) is a public company ... cool! After scanning its most recent 10-K, I can rest easier, since I found no mention of a looming chocolate shortage.
Then I checked the "risk factors" section of the report -- a must-read section for shareholders -- and learned that Wal-Mart (NYSE:WMT) is its biggest customer, and that management is concerned about addressing consumers' health worries.
Homework assignment No. 3: Embrace your inner curmudgeon; it's time to have your say. Familiarize yourself with the proxy statements your company provides, so that you'll know what you'll be voting on at the annual meeting.
And you can do more than vote. By following certain rules, shareholders can put proposals on the annual agenda. For obvious reasons, expect a plethora of proposals this year dealing with executive pay and benefits.
In the same vein, but less obvious, at least a few shareholders at a whole host of companies, including Oshkosh (NYSE:OSK), PG&E, and Whole Foods Market (NASDAQ:WFMI) want the boys and girls at their corporate HQs to reincorporate in North Dakota, according to industry watcher RiskMetrics Group. Lovely state, but, huh? It seems North Dakota has adopted laws deemed shareholder-friendly, including splitting the chairman and CEO roles and establishing annual votes on pay.
Remember: Lottery ticket -- no. Partly your company -- yes.
Other notable recent shareholder proposals:
- Shareholders last year asked that Altria (NYSE:MO) market two types of cigarettes -- one virtually free of nicotine.
- You don't have to be silenced by warm fuzzies just because your company is giving to charity. Some Coca-Cola (NYSE:KO) shareholders in 2006 wanted to know the "business rationale" behind Coke's charitable contributions.
- Think your company was a little dodgy in answering the media's questions? Some ExxonMobil (NYSE:XOM) shareholders in 2004 put on the annual agenda a vote on making the company respond more fully to questions that 60 Minutes had posed about its operations in Equatorial Guinea.
The last year has been a painful one for investors, but also an educational one. You want to beat the market via a moral victory? Learn to be an educated and active shareholder. You don't have to take the boardroom by storm; just keep your eyes open, so you know when it might be time to find better uses for your money.
