Get the Insider Edge With These 3 Stocks
One common complaint among investors is that corporate executives are overpaid and don't act in the best interest of their shareholders. One obvious solution is to find companies whose insiders are shareholders, as they have an obvious selfish incentive to do things that will boost the prices of their company's stock -- and put more money in your pocket in the process. Let's take a look at three stocks in the S&P 500 that are among the top companies in insider ownership and recent performance.
Know where you're going
Navigation specialist Garmin tops our list of insider-owned companies, with insiders owning almost 38% of the company's shares according to S&P Capital IQ. Those two main owners are co-founders Min-Hwan Kao and Gary Burrell, with Kao just having stepped down as CEO at the beginning of 2013 but retaining his role as Executive Chairman. Burrell also remains on Garmin's board as Chairman Emeritus.
Garmin has had to work hard to move beyond its core business in automotive and mobile-device navigation services, with rivals having supplanted the company's former dominance. But Garmin has done surprising well going after niche markets like marine, aviation, and fitness. As long as the company can stay ahead of the curve, investors who follow Garmin's insiders could continue seeing gains like the stock's 55% climb over the past year.
Staying with the high end
The retail world is a cutthroat business, but Nordstrom has put up amazing numbers over time, with gains of more than 450% over the past five years. The business remains a family owned affair, with insiders owning more than 26% of the company. Former Chairman Bruce Nordstrom and his sister Anne Gittinger, who acts as Contributions Director for the company's charitable activity, have the bulk of insider control, but trusts for other family members give company President Blake Nordstrom and executive-team members Erik, James, and Peter Nordstrom added financial incentive to carry out their duties.
Nordstrom has a strong reputation for customer service and high-end products, but it hasn't been afraid to make innovative moves. With its Nordstrom Rack line of stores, the company has used its reputation to bring discount-priced products to shoppers, and that has helped Nordstrom build sales even when economic times have been tough for its customers. Retail remains a turbulent world, but Nordstrom has the staying power to make the most of the opportunities that present themselves.
Betting on a winner
Wynn Resorts is the top performer on this list, with its stock having soared 1,170% since early 2009. The insider ownership of the casino operator is a story in itself, with CEO Steve Wynn owning about 10% of the company outright and having control over a similar stake owned by ex-wife and co-founder Elaine Wynn, who received the shares after their 2009 divorce. Elaine remains on Wynn Resorts' board of directors, although she filed a lawsuit asking for an order to sell her interest in the stock. That raised concerns about the impact of a technical change of control from the sale, which could affect loan covenants and disrupt the entire business.
Operationally, though, Wynn Resorts has been a huge winner, with its foray into Macau bearing fruit at exactly the right time to take advantage of the shift of power in the gaming industry from Las Vegas to the Asian gambling capital. Now, new opportunities in Japan could help give Wynn another big growth opportunity. Competition in gaming is fierce, but Wynn has done a good job of taking advantage of changing conditions in the industry to shareholders' benefit.
Be smart about insider-owned stocks
When it comes to putting management on your side, not just any stock will do. That's because, quite simply put, there's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.
The article Get the Insider Edge With These 3 Stocks originally appeared on Fool.com.Dan Caplinger and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.