Getting Women On Board
AnnaLisa is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Few U.S. companies have "binders full of women" on their board of directors. After perusing a list of 1148 companies on the Women on Board campaign site I only found four with 50% or over representation of women on their board of directors. A recent Credit Suisse report concluded companies with at least one woman on the board have better performance in return on equity, share appreciation, and profit growth. According to a 2012 McKinsey & Co report those with three women or more in senior management perform better on several criteria but as they say in the report," ..in a nutshell-diverse leadership generates stronger business results."
Going over all the publicly and privately held companies with over 20% women on their boards, I was surprised to see not only the expected sectors, food, retail, cosmetics but smaller financials like Piper Jaffray and utilities with higher than expected numbers of women on the board. Kudos! And caution, too, not every one of these names is better just because they have more women on board.
Lipstick In The C-Suite
The highest rating for women on the board would have to go to Bethesda, Md. based Chindex International (NASDAQ: CHDX) with 57% female board directors. Chindex also gets extra Brownie points for a female CEO, Roberta Lipson, and COO, Elyse Beth Silverberg. It's an interesting company, a medical device and system supplier specializing in healthcare systems in China and internationally. It also owns and operates the United Family Healthcare chain of private hospitals and walk-in clinics in four large Chinese cities. Chindex should benefit from recent Chinese government initiatives to "encourage" foreign investment as a way to improve health care.
The market cap is 169.77 million and it was founded in 1981. It's thinly traded with average volume just under 25,000 shares. It's also thinly covered with only one analyst with a $9.50 price target. The P/E is 60.88 and it reports November 7. The profit margin is thin at 2.09% and net income for 2011 was 2.77 million, but it is an under-the-radar play on Chinese healthcare, especially now that it has the government blessing. JP Morgan owns 1,972,398 shares. CEO Lipson owns 837,680 shares and COO Silverberg owns 635,371 shares.
Reporting on November 1 is Avon Products (NYSE: AVP) with 55% of the Board composed of women, including former CEO Andrea Jung's replacement as CEO, Shari McCoy. Avon has come under fire for rebuffing Coty's buyout offer of $24.75, (a significant premium to where it's trading now) especially after years of lackluster quarterly earnings under Jung's tenure. While its yield seems mighty attractive at 5.90%, in August new CFO Kimberly Ross all but guaranteed it would be slashed after 2012. The P/E is 26.97. Direct selling is not the easy supplemental income it used to be and EPS is down 42% year over year. There was also the matter of an investigation into violations of the Foreign Corrupt Practices Act in China. While companies like Wal-Mart and Wynn Resorts can shake it off, Avon was already disappointing investors. (But they did fire the former CFO Charles Cramb in connection with the FCPA charges). If you are counting on yield or a buyout, move along.
Honors go to MTS Systems (NASDAQ: MTSC) an Eden Prairie, Minnesota based scientific and technical instruments maker with female board representation at 50%. It gets extra Brownie points for Susan E. Knight as CFO. It has an 814.79 million market cap and is up 44.93% over the last year. The company operates in two segments, Tests (think wind tunnels, simulators, etc) and Sensors, with testing equipment and sensors for varied industries: automotive, aeronautical, structural engineering, agricultural, petrochemical, architectural, scientific, and more. Its main competitors are Illinois Tool Works and Moog. MTS Systems was in the news recently as it won a contract for its test systems for earthquake-resistant super skyscrapers in China.
What's intriguing with this company is its 2.40% yield at a 31% payout ratio and only a 15.77 P/E. Fellow Fool Seth Jayson also approves its cash conversion cycle. The profit margin of 9.55% is nothing to sneeze at (even if it is cold in Minnesota). Although it only has two analysts covering it, both have much higher price targets in $67-69.00 range which is decent upside of almost 30% now trading at $50.00. The 46 year old company also has some institutional support from Mairs & Power, which owns 1,773,028 shares. The company reports on November 16.
The last name up for credit is Alliant Energy Corp (NYSE: LNT), an electric and natural gas utility holding company with its Board being 50% female. Founded in 1917 and based in Madison, Wisconsin gets extra Brownie points for Chairperson of the Board and CEO Patricia L. Kampling. Alliant mainly covers Iowa, Wisconsin, and Minnesota for residential and commercial power. It also owns some smaller ventures in real estate, barges, a small freight railway business, and power generators. The 4.94 billion market cap company has a decent profit margin for a utility of 7.92%.
The company offers a 4.00% yield at a 69% payout ratio and a18.58 P/E with a forward P/E of 14.96. This name is a mini-conglomerate in the making. It has a beta of only .38. It's covered by seven analysts and was just on October 18 upgraded to buy by Wunderlich and by Robert W. Baird to outperform on May 13. Vanguard owns over 5 million shares and its top mutual fund holder is the iShares Dow Jones Select Dividend Index Fund.
One caveat with Alliant is its debt of $2.98 billion to total cash of $30.80 million. Otherwise, with heating bills to shortly spike in the Midwest, this a name you may want to investigate further as a long term yield candidate. The company reports on November 9.
Not Every Board Is Created Equal
While three of these names are worth a long look, Avon isn't one of them. With the yield promised to be cut and a new CEO under pressure to turn around years of underperformance I certainly wouldn't get in this name before hearing the conference call.
Chindex as the smallest and catering to the Chinese health market is the most speculative but it is intriguing. The most solid names are Alliant and MTS Systems, both are looking very good here. MTS Systems' performance as a stock and its long reach across so many industries is especially exciting and the one most likely to prove McKinsey & Co right with future "strong business results."
leglamp has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.