Insiders who have little or no collective financial stake in a company may have trouble identifying with the common shareholder. However, when insiders as a whole own a large portion of the outstanding stock, I think they are often more sensitive to, or in tune with, the needs of investors, and they will tend to work to enhance shareholder value. Money and the prospect of getting more does, after all, provide a big incentive.

With that in mind, following are companies where insiders own more than 10% of the stock. These companies may be worth a closer look, if for no other reason than the insiders should theoretically have an incentive to work to get the stock price higher. (Keeping tabs on company executives can provide clues about where a stock is headed; see Delving Into Insider Investments.)

Company Market Cap. % Held by Insiders
Children\'s Place (Nadsaq:PLCE) $640M 19.9
Dell (Nasdaq:DELL) $17.8B 12
Kohl\'s (NYSE:KSS) $11.7B 12
Paychex (Nasdaq:PAYX) $8.1B 11.1
Smith & Wesson (Nasdaq:SWHC) $267M 10.2
As of market close March 17.

The Children's Place Retail Stores
The economy may be waning and retailers struggling, but there are things to like about The Children's Place. One that stands out about the New Jersey-based retailer of children's clothes, over and above the 19.9% insider ownership listed by Zacks, was its February same-store sales numbers. Its comps in the period were flat.

Under normal conditions, I realize that would be nothing to get excited about. However, the company had reported a 9% comp gain in the same period last year, so it was up against a difficult comparison. Other big-name retailers had a very difficult month. In February, Macy's (NYSE:M) comps were off 8.5%. Meanwhile, J.C. Penney (NYSE:JCP) saw its February same-store sales numbers decline almost 9%.

Healthy EPS Expectations
The company is expected to have a hefty earnings per share of $2.17 for 2008 and 69 cents per share in the quarter (it expects to release its numbers March 19). In 2009, it's expected to earn $2.11. That means that the company trades at about 10.3 times the 2009 estimate. That's interesting, particularly since the company is expected to grow 10% per annum in the next five years, according to data on Yahoo! Finance. (Learn more in Analyzing Retail Stocks.)

Competition Is Down
On the downside, Gymboree (Nasdaq:GYMB), a California-based children's retailer, reported its preliminary Q4 results earlier this month and took a cautious tone for Q1. My concern is that the company may not be alone, and that perhaps The Children's Place could do the same. Of course, that's just speculation on my part. Note that data on Yahoo! Finance shows that the percentage held by insiders at Gymboree is 0.27%.

Bottom Line
There is no guarantee that a company with insiders who have a big stake will be successful. However, generally speaking, I do think that a large amount of insider ownership can be a good sign, if for no other reason than insiders have a big financial interest in seeing the company succeed.

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