Of course this does not represent the only aspect of a company to evaluate from an investment standpoint. Selling a needed product that won’t go out of fashion with a wide moat against competitors and good fundamentals are some of the other characteristics to consider.
Flavoring, recipe mix, and condiment maker McCormick & Company, Incorporated (NYSE:MKC) operates in an industry where it’s easy to find market-beating returns. You wouldn’t think that a company that packages spices, gravy mix, salt, and pepper would do very well, but in fact it has served shareholders well over the past five years with a total return of 115% versus 25% for the S&P 500 (see chart below).
MKC Total Return Price data by YCharts
No doubt part of the reason for McCormick & Company, Incorporated (NYSE:MKC)’s excellent performance lies in the 21% ownership of the company by its 401K plan. This means employees can buy company stock through their plan. This shows the company wants to go above and beyond in allowing employee ownership, considering most organizations only offer mutual funds. Since employees partake in the risks and rewards of the business they will take better care to ensure its success.
McCormick & Company, Incorporated (NYSE:MKC)’s sales increased 3% with its free cash flow nearly tripling due to lower capital expenditures in the quarter. The company’s industrial segment currently lies in a slump due to the chicken scare in China and lower consumer spending in restaurants. Overall, McCormick expects things to improve later in 2013.
Parts supplier Dorman Products Inc. (NASDAQ:DORM) actually benefited from the great recession as people hold onto their cars longer and buy the high quality aftermarket parts this company provides to retailers such as Autozone and Advanced Auto.
Chairman, CEO and Secretary-Treasurer Steven L. Berman owns 16% of the company, according to its latest proxy, giving the outside investor a certain degree of comfort when considering the company for purchase of shares.
The company did quite well in 2012 growing revenue and free cash flow 11% and 55%, respectively. Dorman Products Inc. (NASDAQ:DORM) noted concerns about consolidation and increasing customer rebates; however, introducing new high quality parts into the aftermarket should help it overcome some of these challenges.
Over the past five years Dorman Products Inc. (NASDAQ:DORM) outperformed the S&P 500 by a factor of 24 (see chart below).
DORM Total Return Price data by YCharts
Apparel retailer The Buckle, Inc. (NYSE:BKE) sells a needed product, but clothes continually go in and out of fashion in an environment with many competitors. So, you may ask what’s so great about this company? The answer: large management ownership. Chairman Daniel Hirschfeld and CEO Dennis Nelson own 34% and 6% of the company respectively according to its latest proxy.
And, it shows. The Buckle, Inc. (NYSE:BKE) pays out a great deal more in dividends than it does on share buybacks, giving shareholders a tangible return on their investment. In 2012, The Buckle, Inc. (NYSE:BKE) did zero share buybacks opting to pay $255 million to its stockholders, most likely incentivized by the large ownership stake of its Chairman. The Chairman and CEO have served in their respective roles since 1991 which indicates stability, teamwork and deep knowledge of trends affecting the business enabling Buckle to go up against its multitude of competitors.
The company possesses excellent fundamentals. In 2012, revenue and free cash flow grew 6% and 11%, respectively. Its cash and investments balance of $180 million represent 62% of its stockholder’s equity with no long term debt.
In the chart below you can see Buckle’s total return exceeded the S&P 500 by a factor of five over the past five years.
BKE Total Return Price data by YCharts
On the whole, these three companies sell high demand products and have solid balance sheets backed by management and employees who partake in the risks and rewards making these companies worthy additions to your portfolio.
The article 3 Companies With Huge Inside Ownership for Your Portfolio originally appeared on Fool.com and is written by William Bias.
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