3 Stocks With The 'Insider Advantage'

There’s a well-worn line in value investing circles that says, “I want to invest with people who eat their own cooking.” In other words, you want the people running the company to have a meaningful chunk of their net worth tied up in the business. You want their wins to be your wins and their losses to sting just as badly as they do for outside shareholders.

That’s not just a preference. It's a filter that can dramatically improve your odds of long-term success in the stock market.

High insider ownership, where executives, directors and sometimes founders maintain significant equity stakes in their own companies, has historically been associated with better returns, better governance, and more durable businesses. While it’s not a silver bullet, it’s one of those factors that keeps showing up in the best investment stories and its merits are well worth understanding.

Let’s begin with the obvious: incentives matter. The principal-agent problem, where the goals of shareholders and management diverge, is one of the oldest and most persistent flaws in corporate America. When management is paid with stock options and RSUs but owns little real equity, they are playing a different game than you are. They may chase short-term stock pops, overpay for acquisitions, or juice earnings just long enough to cash out.

Managers with real skin in the game tend to think more like owners and less like employees. They are more frugal, more focused, and more likely to take the long view. They are less likely to use shareholder money to fund pet projects or trophy headquarters and more likely to reinvest prudently or return capital.

That’s not theoretical. Academic literature backs this up.

One of the most well-known studies in this field is by Morck, Shleifer and Vishny (1988), which examined the relationship between insider ownership and firm performance. They found that companies with insider ownership tended to outperform, especially when those insiders were founder-operators or long-term stewards.

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Let’s discuss real-world examples. Consider the long-term success of companies like Constellation Software (run by founder Mark Leonard), Berkshire Hathaway (Buffett owns ~15% of the company), or Old Dominion Freight Line (run for decades by the Congdon family). These are not rent-a-manager outfits. They are companies with long-term visionaries at the helm who live and breathe the business.

Owner-operators don’t need to be reminded to think about shareholders. They are the shareholders. They’re more likely to maintain conservative balance sheets, repurchase shares at undervalued levels, and focus on sustainable free cash flow rather than cosmetic metrics that trigger a bonus.

That’s not to say they’re infallible. Founder-led businesses can be stubborn and slow to pivot. But the long-term results suggest that when you back a capable owner with real skin in the game, your odds of compounding capital go up.

Insider ownership works best as an investment filter in conjunction with other value-driven signals. If you’re already screening for low price-to-book, high free cash flow yield, or improving return on capital, adding insider ownership can significantly improve your hit rate.

It’s particularly powerful in small-cap land, where liquidity is thin and institutional ownership is low. This is where information asymmetries are greatest and insiders have the most edge.

It also plays well in special situations: restructurings, spin-offs, and deep-value turnarounds. When insiders step up in those moments, they often see something the market has missed or misunderstood.

In a market full of noise, buybacks and accounting tricks, insider ownership is one of the few things you can still count on. It tells you who is riding alongside you—and who is just along for the ride.

As investors, we spend a lot of time looking for edges. Some are ephemeral. Some are overfished. But the edge you get by aligning yourself with people who are financially and emotionally invested in their business—that’s durable. It’s old-fashioned. And it works.

So the next time you’re researching a stock, pull up the proxy statement and look at the insider roster. Are they buying? Are they holding? Or are they just renting the title?

Because in the end, when the people running the show are betting their own money, the odds of a good outcome go up.

Here are three stocks that are undervalued and have massive amounts of skin in the game:

Worthington Steel WS is a recent spinoff from Worthington Enterprises (formerly Worthington Industries), focusing squarely on value-added steel processing. The company serves a diversified customer base in automotive, construction and agriculture, providing flat-rolled steel solutions, including galvanizing, pickling, slitting, and laser welding.

As a pure-play steel processor, WS is tightly leveraged to domestic industrial production and reshoring trends in U.S. manufacturing. The company’s focus on higher-margin, engineered solutions should allow it to avoid the full volatility of commodity steel pricing. Importantly, the spinoff structure gives it autonomy to reinvest cash flow in strategic initiatives, namely automation and customized supply chain services. That allows it to inch closer to “industrial tech” margins over time.

WS trades around 6x forward EBITDA, with a modest market cap under $1 billion. It carries a solid balance sheet with minimal net debt and generates healthy free cash flow. It offers better margin stability and trades at a discount than larger, less specialized steel companies. If EBITDA can stabilize or grow modestly in an industrial upturn, the upside could be 50–75% over a cycle.

Insiders, including directors and executives, own more than 10% of shares post-spinoff, signaling real alignment. The company’s leadership, including CEO Geoff Gilmore (former president of Worthington’s steel business), has a long tenure and deep operational familiarity.

EVI Industries EVI is building a national platform for commercial laundry equipment distribution and service. Over the last several years, the company has quietly acquired more than 20 laundry distributors, consolidating a highly fragmented and regionalized industry. It sells washers, dryers, and finishing systems and provides service and parts through its subsidiaries.

EVI is a long-term roll-up story in a sleepy but essential niche. The core investment case centers on scale benefits, operating leverage, and succession-driven acquisitions. Thanks to institutional and multi-family customers, the business is relatively recession-resistant. Its decentralized model allows local operators to retain control while benefiting from shared resources and systems.

EVI trades at around 20x trailing earnings, which may seem rich for a distribution company. But this is a case where GAAP earnings understate the underlying opportunity. Adjusted EBITDA and operating income are growing faster than reported net income due to the dealmaking cadence and acquisition-related costs. The real value here lies in what the company could look like in five years if it doubles revenue again with modest margin improvement.

Chairman Henry Nahmad and his extended network (including insiders and strategic investors) control more than 40% of the shares. That level of ownership is not just rare—it is strategic. It ensures that value creation for minority shareholders is aligned with management’s own long-term objectives. Nahmad has been disciplined, long-term focused, and extremely reticent about taking on excessive debt.

Hamilton Beach HBB is a legacy name in small kitchen appliances, including blenders, toasters, coffeemakers, and more. The company distributes its products through mass-market retailers like Walmart, Target, and Amazon, as well as through commercial channels.

This is a turnaround and cash flow story, not a growth engine. Input costs and consumer shifts have pressured margins, but the company has recently shown signs of recovery. Gross margins improved in 2023 and continued through Q1 2024, thanks to better supply chain execution and SKU rationalization. The brand’s familiarity and low price points make it resilient in discount-driven environments.

HBB trades at under 7x normalized earnings and around 0.3x sales—a discount to historical averages and peers in branded consumer products. The company has paid a consistent dividend, currently yielding around 3.5%, and has used excess cash for debt reduction. While growth is tepid, the earnings power is intact, and there’s real optionality if appliance demand stabilizes in late 2025.

The holding structure tells a lot. HBB is still part of the NACCO family, with significant shares held by insiders and affiliates. Current and former executives control over 20% of shares, and the board is tightly aligned with long-term value preservation. This is not a management team likely to chase fads or sacrifice balance sheet strength for short-term growth.

Editorial content from our expert contributors is intended to be information for the general public and not individualized investment advice. Editors/contributors are presenting their individual opinions and strategies, which are neither expressly nor impliedly approved or endorsed by Benzinga.

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