The flipside of shareholder-friendly stocks expected to underperform the market? Highfliers that pay little heed to their owners' interests. Conversely, though, there do exist some 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. ISS then 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.
|
Company |
(out of 5) |
Index CGQ Ranking* |
Industry CGQ Ranking* |
|---|---|---|---|
|
Newmont Mining |
**** |
87.3% |
98.2% |
|
Coeur D'Alene Mines |
**** |
69.4% |
56.1% |
|
USEC |
***** |
92.4% |
87.3% |
|
Zix |
**** |
83.5% |
66% |
|
Bristol-Myers Squibb |
**** |
86% |
99.5% |
Sources: Yahoo! Finance, Motley Fool CAPS.
*Relative placement when compared to 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 of investing, there are many factors that an investor should consider regarding whether a company is good, and how well it 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
A resurgent dollar is tarnishing gold's reputation these days as an inflation hedge, causing prices to slip. Meanwhile, a weak equities market is doing nothing to help, as margin calls are causing traders to sell their gold to raise cash. While that might impact Newmont Mining in the near term, the world's second-largest gold producer ought to benefit in the long term. Weaker global economies are pushing governments to infuse their markets with cash, and that is a trend pointing to higher inflation everywhere. Stronger dollar or not, gold ought to regain its luster soon.
CAPS member 4thRockFool feels that gold has overcorrected and thinks the fundamentals of the industry remain intact:
Gold play based on fundamentals (supply and demand) and a hedge against inflation. [Newmont Mining] is trading near a 52 week low. Recent correction in gold and other commodities is overblown. The fundamentals have not changed-China, et al. will continue to need gold and other metals to grow their economies. Recent massive infusions of capital by the Fed pose significant inflation risk for which gold is the refuge of choice.
CAPS member mustbebusby sees USEC gaining a competitive advantage from the Department of Energy's $18 billion loan program begun earlier this year to encourage new construction of nuclear power plants:
[USEC] is the most viable candidate to receive a lions share of $2bln-$4bln worth of Department of Energy loans earmarked for companies that enrich uranium. They are presently the only licensed enrichers of uranium in the United States.... They are presently tapped out of cash.... and the DOE has already invested in USU's research and development for many years prior to this. They are a shoe in to receive this DOE aid.
You can read mustbebusby's full pitch on the USEC CAPS page, but a number of companies including Duke Energy
A Foolish quotient
Many factors go into whether a stock is a buy or 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.
