The Lost Art of Ownership

"Well, I appreciate the opportunity you're giving me Mr. Cromwell as the single largest shareholder in Teldar Paper, to speak....Now, in the days of the free market when our country was a top industrial power, there was accountability to the stockholder. The Carnegies, the Mellons, the men that built this great industrial empire, made sure of it because it was their money at stake....You own the company. That's right, you, the stockholder."

For those of you that have seen Wall Street, you will know the above is the scene were Gordon Gekko is addressing the shareholders at the company's annual meeting.

Today, at 2pm, I will be at the annual meeting at the Pelican Yacht Club in Fort Pierce. Granted, this is nothing to compare to say the huge annual meetings of companies like Warren Buffet's Berkshire Hathaway or other large American entities like Disney, Ford, etc. But, nevertheless, it is an annual meeting, and it is the same principle. The board of directors will provide a year in review for 2006 and discuss the goals and challenges for 2007. The board of directors will be addressing the members - members who actually are sharholders and own a share of the corporation that is the Pelican Yacht Club. Granted, this is a little different as there are no dividends, stock splits, etc., but regardless, the people at this meeting are owners. Unfortunately, the vast majority of the owners will not be present. Of the 350 or so owners, I estimate maybe 100, tops, will be represented in person or via proxy.

I think today the art of ownership is lost - or at least misunderstood. I am guilty of this myself, too, on many levels, but when you purchase shares of stock in a company on the stock market - any company big or small - you become an owner. That purchase makes you an owner of the company, just as if you owned your own company. You are legally entitled to all sorts of privileges, such as the right to vote, rights to profits. Also, as an owner, you also have responsibilities, such as to learn as much about the company as you possibly can - remember, your money is at stake.

The other day, I was in the car on I-95 and passed a semi-truck. On the rubber flaps that are behind the tires, I was astonished to see the logo of Wabash National (NYSE: WNC) on the flaps. It told me that the the trailer hitched on the rig was made by Wabash National. Since then, I have seen several trucks with this same characteristic. Why should I be surprised? I shouldn't be. WNC is the #1 manufacturer of truck trailers in the country and an acquisition during 2006 of the #10 manufacturer only strengthens their position. So, from a probability stand point, I should see more Wabash National trailers than any other individual trailer manufacturer.

Seeing the logo, I felt pretty good about my position in WNC. From a performance standpoint, only time will tell if it was a good decision to buy (it appears to be so far), but I recognized the logo and felt good about it. I felt that I took pride in my ownership of WNC and that I understood it. Who knows how many WNC trucks I have seen through the years, but just was not paying attention. Now I am and I felt good about being an owner - being entitled to company dividends, sharing in the success and rewards as the company does well, and being like..."hey, my company made that trailer."

In the previous sentence, the latter may be a little zealous, but I think we have to think that way. I think we have to get beyond thinking that a share of stock is a piece of paper that has an arbitrary value that goes up or down. Sure, we all want our stocks to go up because we want to own something that increases in value over time. But, owning a stock should not be looked at as only having the right to sell it when you feel like it or when it reaches a certain price. Yes, we are all stewards of our own little nest eggs, regardless of how big or small, and we have the responsibility to make good financial decisions, but owning stock is far more than "buy low, sell high."

I think of companies in my portfolio like Seaboard Corp (AMEX: SEB) and Ash Grove Cement (Pink Sheet: ASHG). The founding families of these companies own huge blocks of the company. I estimate that the Bresky family controls 70%-80% of SEB stock and that the Sunderlands control anywhere from 80%-90% of ASHG. The latter is difficult to figure out because they not required to report ownership, but SEB is more clear. Additionally, in both cases, I suspect that both companies and families purchase additional shares of the company's stock on the open market or in private transactions and are further willing to buy what you are selling.

SEB, for instance, since they have to file with the SEC and information is more readily available. The founding family's stake is worth about $1.8B. However, they don't sell it. The CEO, Steven Bresky and member of the founding family makes a $1.5M/year salary and the Bresky family takes home about $2.6M in dividends. So, yes, that is a ton of money, but $4.1M per year is only about 0.2% of their entire SEB worth. The situation at ASHG is likely very similar, though I do not have exact #'s. The point is, nearly of the families sell their stock to buy big houses, big lifestyle, etc. They maintain their ownership where it is at, even acquire more - despite them not having access to that full amount of cash and fronting their own cash to buy more.

The above stories are a little extreme, but compare to the other extreme, say at our company in Vero Beach. Most everyone who works there owns shares of stock and/or stock options. I am towards the upper end of the spectrum in terms of # of shares I own, which is nice, though the shares are worthless. However, not a day goes by where a discussion of "I can't wait for the company to sell so I can dump my shares" comes up. Understood - you have to diversify and god knows I'd be likely to do the same under the same circumstances, but what happened to valuing the ownership? Why would anyone want to buy the shares from you if they know all you care about is getting rich off them and selling them to build a big house, buy a fancy car, etc. My question is, where is the honor and pride of ownership anymore?

Yes, in any given time frame, whether it be 1 month, 1 year, 10 years, or 100 years, there will always be one stock or company that does the best in terms of providing returns to shareholders. Someone has to be #1 and I think often, especially with the greed that circles around the stock market, we feel we have to be #1 all of the time. So, people move their money around from stock to stock - forgetting the art of ownership. But, even saying being the #100 performing stock of 2006 is pretty good about still puts you in the top 1% Even if your stock you owned was the #1000 performer, you would still be doing very well in terms of building wealth.

So, yes, we are here in the stock market to make money, but the #1 thing to remember is that you are an owner, so act like one. Understand where your money is because your money is at stake. Participate in annual meetings - submit your ideas and proposals to the board of directors, though do so with tact and informed expression.

There is nothing worse than the guy with 10 shares at the Ford annual meeting that just crassly screams out "RAISE THE DIVIDEND". Trust me - this happens - I have been to the Harbor Federal (now National City, NYSE: NCC) annual meetings. Dividends are great, yes, as they are returns of actual cash to the investors and owners - but, if the board feels that money can be better used by re-purchasing stock or retaining for acquisitions or other corporate purposes, then so be it. If you want more dividends, write a business case as to why you feel the cash can do better if in the hands of the owners (shareholders) rather than the company and acquire support for it, whether it be by lobbying the board members, other stockholders, or just buying all of the stock yourself.

Make the most of your ownership rights. You don't have to go crazy, but at the very least, participate in elections of directors, proxy statements (if you cannot physically attend the meeting), and act like an owner. It's hard to do all the time, especially as a stock goes down or up, but it's a good thing to keep in the back of your mind.