#WednesdayWisdom No.9 - 20 Companies With Skin in the Game

And the best one of them all...

Jan 24, 2024

1 Investing Concept

“Skin in the game” is very important.

Companies with high inside ownership outperform the market consistently.

And that’s why in this article, I’m going to give you 20 quality stocks with high inside ownership (more than 30%).

And my favorite one of them all!

Keeping It Simple

A study by Credit Suisse showed that family-owned companies outperform non-family-owned companies by 3.6% per year.

Why?

Family businesses tend to be more conservatively financed, reflected in lower financial leverage.
Evidence that family-owned businesses generate a higher conversion rate of innovation inputs into innovation outcomes.
Family-owned businesses tend to operate a lot more efficiently.

But mainly (and most simply), companies where owners have skin in the game think and act like owners.

They always have their long-term interests as the priority. This can’t be said for all companies.

But surely we don’t just look at inside ownership when analyzing a stock?

Correct. By investing in companies that have skin in the game AND those that meet my quality criteria, we can find some of the best companies in the world to invest in.

It really doesn’t have to be that complex.

20 Companies With Skin In The Game

I used finviz to screen for the below quality stocks. My inputs were:

Inside ownership OVER 30%
EPS growth past 5 years OVER 5%
Net profit margin OVER 10%
Debt/Equity UNDER 0.8
Return on Equity OVER 25%

This means the companies have:

Great capital allocation skills
High profitability
Good financial leverage
Attractive growth

And of course, they’re in the basket of stocks that (according to Credit Suisse), are likely to outperform the market without the above characteristics.

Of course there’s more to analyzing a stock than a quick screen like this, but this will immediately filter for stocks I’d be interested in.

Here’s what this screen returned:

We’ve got some big names in there such as GOOG 0.00%↑ and GOOGL 0.00%↑, however the majority are less well-known, and less followed stocks.

This is where the larger returns are seen as smaller cap stocks are more regularly mispriced.

In fact, small cap stocks outperformed large cap stocks by 3.4% per year over the last century.

1 Investment Idea - KARO 0.00%↑

My favorite from this list is Karooooo Ltd KARO 0.00%↑ - a Singapore based company that provides mobility software-as-a-service (Saas)

Here’s why I love KARO 0.00%↑ :

Inside ownership OVER 70%
Leading player in niche
Emerging market (further potential growth)
Small cap stock
Very healthy and growing margins
ROIC OVER 20%
Cash flow to debt is 6.2

Obviously this is a small cap stock which carries extra risk, but I’m liking the look of this one a lot.

As always, do your own research.

1 Graphic

At the end of the day, a quality business has lots of cash enter the company, and little cash leave the company.

Here’s 5 cash flow ratios you need to know:

1 In-Depth Twitter (X) Thread

In case I haven’t given you enough stocks today, take a look at this post which screens for 23 quality stocks that fit a set criteria:

You can see the stocks here!

1 Quote

“I like it when directors and executives of a company have significant holdings in their own company. Indeed, I’m delighted when they go out and buy even more shares at market prices. We’re more likely to make money when the people in charge of a business have significant personal money invested in it.” - Warren Buffett

That’s it for the day

I hope you loved this article. As I develop on here, I’m sure there will be some changes to my structure and style, so please do leave some feedback for me.

About the author

Make Money, Make Time is written by Oliver, a qualified CA, and investor who has read over 300 investment books, and spends more than 50 hours per week researching stocks so that you don’t have to. Let’s level-up together

Make Money, Make Time