Between shareholder-friendly stocks expected to underperform the market, and highfliers that pay little heed to their owners' interests, you'll find 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. Today 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.
|
Company |
Index CGQ Ranking^ |
Industry CGQ Ranking^ |
|
|---|---|---|---|
|
Buckle |
**** |
55.6% |
67.9% |
|
Dynegy |
**** |
68.6% |
78.9% |
|
EMC |
**** |
72.4% |
96.6% |
|
Pfizer |
**** |
69.2% |
98.8% |
|
Terra Industries |
**** |
52.7% |
73.2% |
Sources: 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
If you can't beat 'em, join 'em. That seems to be the philosophy guiding giant drugmaker Pfizer these days, as it continues to expand its generic-drug business. Yes, generics! The pharmaceutical has some of the most recognizable brand-name drugs in Viagra, Zoloft, Lipitor, and Zyrtec, but generic drugs have been steadily gnawing away at sales. According to its last quarterly report, domestic revenue fell 6% over the first three quarters of 2009, partly due to generic-drug competition, and the U.S. pharmaceutical division saw sales drop 2% as Lipitor, Celebrex, and Lyrica succumbed to generic pressure.
To counteract those effects, Pfizer has been making forays into the generics business. Through partnerships with primarily India-based generic-drug makers, it has been able to expand its portfolio of such drugs while at the same time raising its profile in emerging markets. The latest deal gives Pfizer entrance into the $11 billion U.S. off-patent injectable medicines market, though it hasn't detailed how much business it hopes to capture. The company has partnered with India's Strides Arcolab, a manufacturer of both branded and generic drugs.
Pharma-generic tie-ups are nothing new, though. Novartis
Despite some flubs, investors think Pfizer is still inoculated against a downturn. ross812 joins more than 5,000 other CAPS members in thinking the pharmaceutical giant will continue to surprise the market:
Undervalued by 20% based on conservative earnings estimates. The company has supprised the street 3 of the last 4 quarters. The health care debate seems to be finalizing and I forsee little change in biotech patents from the new legislation.
Some 90% of the CAPS community who registered an opinion think Pfizer will outperform the market, while a slightly higher percentage of All-Stars feel that way. Why not head over to the Pfizer CAPS page and give us more than just a generic opinion on why this pharmaceutical will continue to be a branding force for years to come.
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.
