In August 2006, the Wall Street Journal did an article on us and our distaste for companies that use stock-based compensation. (See Seeking Out Firms That Don't Bother With Stock Options.) Herb Greenberg did a follow-up discussing the performance of the ten stocks mentioned in the original piece.

Options Update: Last August, in a column here headlined, "Seeking Out Firms That Don't Bother With Stock Options," Albert Meyer of Bastiat Capital said he would rather buy stocks of companies that don't offer stock options than those that do. "It's a no-brainer for money managers who don't want surprises of backdating and dilution and just the difficulty of analysis," he said at the time. Mr. Meyer had offered up a list of 10 stocks, including CompuCredit Corp., Pilgrim's Pride Corp. and Seaboard Corp.

How have they done? An investor who bought into each of the 10 stocks in late August would have seen their stake, including dividends, increase 29.4% through June 7, he says, compared with the 15.1% return in the Standard & Poor's 500-stock index over the same period. Why have these companies done so well relative to the market? "They do well because they have management that seeks the best for shareholders, proved by the fact that they shun the opportunity to make a quick buck for themselves through the use of stock options -- a practice that dilutes shareholders." Based on these returns, he may be on to something.