More so than most, I have long been intrigued by the 1960s fad of investing in conglomerate stocks. You have these beautiful, completely unrelated businesses that churn out profits under nearly all economic conditions, and, if properly managed, are immune from bankruptcy unless the conglomerate itself takes takes on too much debt or an insurance liability that could take down the parent entity if manifested.
The downside of conglomerate investing is that, as a class, conglomerate indices tend to underperform the S&P 500 Index. The theory is that each member of the portfolio is unable to reach its potential due to a lack of focus as individual business lines become neglected because no individual part receives extensive care and attention.
However, I believe that the underperformance of the conglomerate is tolerable because, in the event that there is a corporate spin-off event, you were already sitting there at the low … Read the rest of this article!
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