Top-Rated Stocks That Treat Shareholders Right

The flip side to shareholder-friendly stocks expected to underperform the market? Highfliers that pay little heed to their owners' interests. Conversely, there are 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 covering four broad areas. Moreover, each company is scored relative to its market index and its industry group. It assigns the stocks a rating that it calls its corporate governance quotient, or CGQ.

Some evidence supports the notion that companies with weaker governance have higher risk, decreased profitability, and lower valuations. We'll be looking at stocks that Motley Fool CAPS investors have marked to outperform the market and that also sport above-average CGQ scores, either in their index group or among industry peers.

Source: Yahoo! Finance, Motley Fool CAPS. *Relative placement when compared with 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 success in investing, there are many factors 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
The hope for a major PC upgrade cycle got a boost earlier this week when an analyst said businesses can only defer upgrading their aging installed bases for so long. Considering Microsoft (NASDAQ:MSFT) starts shipping Windows 7 soon, this could be the start of something big -- something that might just drag other tech names along with it, like Intel.

Or not. With the economy still fragile, there seems to be little incentive for businesses to engage in any meaningful upgrades of PCs or even servers at this point. Microsoft reported a decline in annual sales for the first time in its history as profits fell 29% on a 17% decline in revenues.

Fortunately for Intel, there are newer markets to conquer, like mobile computing. As the chasm between computers and cell phones narrows, Intel is likely to gain more share there. It already powers the netbook niche, and as your handset functions more like a computer, it's going to need the resources that an Intel processor can provide. Bringing its R&D power to bear on the market gives Intel a competitive edge that will be tough to dispute.

Chances are CAPS member gorfo57 had all computing platforms in mind when he suggested that the ubiquity of Intel's processors is not likely to disappear anytime soon:

Chances are your computer holds both their CPU and chipsets. Chances are in 2-4 years you'll be using a new computer also holding their cpu and chipsets. Chances are, you're not likely to stop using a computer.

No assurances
One can only hope that the body of the so-called "public option" health insurance plan is already getting cold. It was a bit too Orwellian for me to accept that government-run health care is a boon to capitalism, but channeling consumer anger at insurance companies that charge high premiums for limited benefits while denying claims was a smart move by the Obama administration. It ought to make the insurers like UnitedHealth and Aetna (NYSE:AET) realize that while a public-option program is in all probability dead (though not yet buried), reform is still coming. The antagonism directed at insurers has not dissipated, and we can count on change, so we should figure out how we can profit from it.

CAPS member Prodders thinks that with the health-care debate moving off in a different direction, UnitedHealth will be one of the winners:

Cheap, looks good on a technical basis, and I the sector will continue to outperform as the health care bill gets more clarity, and as investors rotate back out of high-beta names and into more defensive areas.

A Foolish quotient
Many factors go into whether a stock is a buy or a sell, but do corporate governance policies enter into your equation? 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.