Do you know how well your favorite companies are being run? How can you tell?
Sometimes investors forget that when they're buying a stock, they're investing in an ownership share of a company. The management of a company is paramount to its success, so as a potential company owner, stock investors should look into how companies are being managed. The implications to stock performance are big.
One way to gauge this is by considering the corporate governance policies of a company. These policies dictate how a company runs with regard to its board of directors, the board's contact with management, and shareholder rights.
Investing ideas
To illustrate this, we ran a screen on underperforming stocks trading within 10% of their 52-week low.
Institutional Shareholder Services (ISS) gives ratings for four areas of corporate governance on risks related to the board, the audit committee, the compensation committee, and shareholder rights.
We screened these underperforming stocks for those receiving "low risk" ratings in all four corporate governance categories from ISS.
ISS believes that these companies have strong corporate governance policies -- do you think they're in a position to overcome the trend and rise from their recent lows?
List sorted by market cap. (Click here to access free, interactive tools to analyze these ideas.)
1. Microsoft (Nasdaq: MSFT): Develops, licenses, and supports a range of software products and services for various computing devices worldwide. Market cap of $215.18B. The company received "low risk" ratings in all four corporate governance categories.
2. JPMorgan Chase (NYSE: JPM): Provides various financial services worldwide. Market cap of $117.68B. The company received "low risk" ratings in all four corporate governance categories.
3. Time Warner Cable (NYSE: TWC): Operates as a cable operator in the United States. Market cap of $19.30B. The company received "low risk" ratings in all four corporate governance categories.
4. PG & E (NYSE: PCG): Operates as a public utility company that engages in electricity and natural gas distribution primarily in northern and central California. Market cap of $15.76B. The company received "low risk" ratings in all four corporate governance categories.
5. SunTrust Banks (NYSE: STI): Operates as the holding company for SunTrust Bank, which provides various financial services to consumer and corporate customers in the United States. Market cap of $9.74B. The company received "low risk" ratings in all four corporate governance categories.
6. Zimmer Holdings (NYSE: ZMH): Engages in the design, development, manufacture, and marketing of orthopaedic reconstructive implants, spinal and trauma devices, dental implants, and related surgical products. Market cap of $9.06B. The company received "low risk" ratings in all four corporate governance categories.
7. Whirlpool (NYSE: WHR): Engages in the manufacture and marketing of home appliances worldwide. Market cap of $3.75B. The company received "low risk" ratings in all four corporate governance categories.
8. Solera Holdings (NYSE: SLH): Provides software and services to the automobile insurance claims processing industry. Market cap of $3.35B. The company received "low risk" ratings in all four corporate governance categories.
9. Jack in the Box (Nasdaq: JACK): Operates as a restaurant company that operates and franchises Jack in the Box restaurants. Market cap of $950.79M. The company received "low risk" ratings in all four corporate governance categories.
10. Investors Real Estate Trust (Nasdaq: IRET): Engages in the ownership and operation of income-producing real estate properties in the United States. Market cap of $557.46M. The company received "low risk" ratings in all four corporate governance categories.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Alexander Crawford does not own any of the shares mentioned above. ISS ratings sourced from Yahoo! Finance.
