I like executives that eat their own cooking. Managers can make all the rosy projections in the world, but if they’re not willing to step up and put their money where their mouth is, it tells you what they really think. High insider ownership also aligns the interests of the CEO with us shareholders. If a manager invests his wealth elsewhere, then what incentive does he have to promote the well-being of investors as opposed to lining his own pockets? You don’t have to worry about executives looting the business when you know their wealth depends on the long-term health of the company...
Therefore, it should come as no surprise that stocks with high insider ownership tend to outperform over the long run. The most obvious example, of course, is Warren Buffett, who has kept almost his entire net worth invested in Berkshire Hathaway Inc. (NYSE:BRK-A, NYSE:BRK-B). You can also point to other popular examples, like Elon Musk at Tesla Inc (NASDAQ:TSLA), Bill Gates at Microsoft Corporation (NASDAQ:MSFT), and Steve Jobs at Apple Inc. (NASDAQ:AAPL).
Source: Income Investors
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