Two of the best indicators of superior stocks are high insider ownership and long executive tenure. These include companies such as Nike (NYSE:NKE), Amazon.com (NASDAQ:AMZN), and little-known Drew Industries (NYSE:DW).
Phil Knight founded Nike in the 1960s. He was CEO until 2004, has been a director since 1968, and continues to hold more than 25% of outstanding stock. Nike has returned more than 20% annually for the last 15 years.
Jeff Bezos founded Amazon.com in 1994 and has served as chairman ever since. He's also been the CEO since 1996 and pays himself just $81,000 per year in salary. Why? Because all of his worth is tied up in the empire he's building. He owns 25% of shares -- shares that have appreciated to the tune of 48% annually since the IPO.
Drew Industries CEO Leigh Abrams has been at the company for more than 30 years. He and the chairman continue to own more than $45 million worth of stock. It's not a coincidence that the company has increased 200 times in value over the same time frame.
Nike, Amazon, and Drew aren't alone. Microsoft, Oracle, Gap, Starbucks, Best Buy, Apple, and many more of the stock market's biggest winners share the same pattern of success.
Insider ownership and management tenure are strong indicators of success. But they only apply to equities, right? Wrong.
Financial all-stars
One of Fool fund guru Shannon Zimmerman's favorite funds is Dodge & Cox International (FUND:DODFX). The fund is up 65% since Shannon recommended it in June 2003 on the back of holdings such as GlaxoSmithKline (NYSE:GSK), Norsk Hydro (NYSE:NHY), and Honda (NYSE:HMC) against broader market gains of just 15%. How did he find this Champ? Easy. Management told him all he needed to know.
While Dodge & Cox International has only been operational since May 2001, the fund's talented management team has been at the venerable Dodge & Cox firm an average of 16 years. That means they've been fine-tuning their investment strategies since before the fall of the Berlin Wall. In other words, a long time.
Just as in equities, significant management tenure is a positive indicator. It means the managers love their work, are excellent at their work, and likely have a large financial stake in the success of their work. All of these translate into outsized returns for the individual investor.
This is not true of all companies, and it is certainly not true of mutual funds. The average tenure of a portfolio manager is just five years. That's not even long enough to establish a meaningful track record.
At Motley Fool Champion Funds, Shannon Zimmerman is committed to helping subscribers find the best managers, dedicated to serving shareholders through great returns. And the strategy is working. To date, Shannon's recommendations are besting their benchmarks by nearly 10 percentage points. Shannon names his newest Champ today at 4 p.m. EST. To find out the fund that gets the nod, click here for a 30-day free trial of Champion Funds. You'll have access to all of Shannon's research without any obligation to subscribe.
Tim Hanson does not own shares of any company mentioned. Amazon.com and Best Buy are Motley Fool Stock Advisor recommendations. Microsoft is an Inside Value recommendation. Gap is a Stock Advisor and an Inside Value recommendation. GlaxoSmithKline is an Income Investor recommendation. Drew Industries is a Hidden Gems recommendation. No Fool is too cool for disclosure . and Tim's pretty darn cool.
