Highly Successful CEOs: Show Me The Stock Options, Not The Cash

In early March, I made the case that there’s
Stock isn’t just good for executives; it’s also good for shareholders.

In a 2010 study piece that appeared in the NYU Journal of Law & Business, Villanova University Business Law Professor Richard A. Booth writes that “stock options are indeed the best form of incentive compensation yet devised” for CEOs. His reasoning:

“[I]t is the supposed duty of the directors and officers to maximize stockholder value. In practice, there are few situations in which that duty is enforced as a matter of law. Options fill the gap.”

Although options are a specific type of security, giving the holder the right to buy or sell shares at a later date, they’re used here as a proxy for the broader argument that stock helps executives better align their interests with shareholders’.

Despite Greece, Investors Still Bullish on Europe

You might have noticed that Greece has been in the headlines a lot lately.

Many global investors are anxious to see how the drama unfolds, as the beleaguered Mediterranean country, strapped for cash, is staring down billions of euros in upcoming bailout loan repayments, not to mention salaries and pensions. On May 12, Greece will owe the International Monetary Fund (IMF) 0.8 billion euros, and between the end of July and beginning of August, 7 billion euros in bond payments become due to the European Central Bank (ECB), according to Wood & Company.

Below you can see which countries would be impacted the most were Greece to default on its obligations. Although Germany holds the greatest amount of Greek debt—over 84 billion euros’ worth—Slovenia would be hurt the worst, as 4 percent of its GDP is tied up in the country’s debt.

Disclaimer and Disclosure: Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. By investing in a specific geographic region, a regional fund’s returns and share price may be more volatile than those of a less concentrated portfolio. The Emerging Europe Fund invests more than 25% of its investments in companies principally engaged in the oil & gas or banking industries. The risk of concentrating investments in this group of industries will make the fund more susceptible to risk in these industries than funds which do not concentrate their investments in an industry and may make the fund’s performance more volatile.

Gold, precious metals, and precious minerals funds may be susceptible to adverse economic, political or regulatory developments due to concentrating in a single theme. The prices of gold, precious metals, and precious minerals are subject to substantial price fluctuations over short periods of time and may be affected by unpredicted international monetary and political policies. We suggest investing no more than 5% to 10% of your portfolio in these sectors.

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The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. The S&P 1500 Composite is a broad-based capitalization-weighted index of 1500 U.S. companies and is comprised of the S&P 400, S&P 500, and the S&P 600. The index was developed with a base value of 100 as of December 30, 1994. The MSCI Emerging Markets Europe 10/40 Index (Net Total Return) is a free float-adjusted market capitalization index that is designed to measure equity performance in the emerging market countries of Europe (Czech Republic, Greece, Hungary, Poland, Russia, and Turkey). The index is calculated on a net return basis (i.e., reflects the minimum possible dividend reinvestment after deduction of the maximum rate withholding tax). The index is periodically rebalanced relative to the constituents' weights in the parent index.

Fund portfolios are actively managed, and holdings may change daily. Holdings are reported as of the most recent quarter-end. Holdings in the All American Equity Fund, Holmes Macro Trends Fund, Emerging Europe Fund, Gold and Precious Metals Fund and World Precious Minerals Fund as a percentage of net assets as of 3/31/2015: Berkshire Hathaway Inc. (NYSE:BRKa) 0.00%, Tesla Motors Inc (NASDAQ:TSLA). 0.00%, American Airlines 0.00%, Allegiant Travel Company 0.00%, Apple Inc (NASDAQ:AAPL). 4.03% in All American Equity Fund and 5.34% in Holmes Macros Trends Fund, Oracle Corporation (NYSE:ORCL) 1.00% in All American Equity Fund.

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Written By: Frank Holmes