There’s all manner of reasons for these failures; sometimes it’s the intense competition of the market, other times it’s a technological change, then there’s outright fraud and mismanagement.
Of course companies will come and go, but the failures of these formerly great companies should serve as a reminder to investors not to hitch their plans to any one sector or business.
Eastman Kodak was once a seemingly unassailable company due to its dominance in the photo and chemicals market.
Kodak had a greater market value than Exxon and its shareholders had and uninterrupted stream of dividends dating back to 1902.
Then digital photography arrived; today Kodak’s dividend has been suspended and in September its share price fell to its lowest point ever.
Some of you might know the name Viagra – and for reasons I won’t go into – but the company that sold Viagra to the world, Pfizer, was once regarded as “the best company in the S&P 500,” with an endless drug pipeline to provide revenue.
That was in the late 90’s, today the Viagra boom has subsided and patents on profitable products are expiring, consequently Pfizer’s share price has slumped 50% since 1998.
Other names you may recognise before they collapsed, were liquidated, or re-emerged as new entities:
Kmart (USA) – wiped out shareholders with its 2003 bankruptcy.
Swissair – known as the flying bank until going under in 2002.
Polaroid – fell to the same market forces that beset Kodak.
Blockbuster Video – shareholders are expected to emerge with nothing after the current liquidation.
As you can see, the ability to continually generate above average profits will always be under some form of attack.
Today’s rooster can be tomorrow’s feather duster and the only way to guard against this is by holding a well diversified portfolio.
Peter Mancell is a director of Mancell Financial Group and FYG Planners AFSL / ACL 224543. This information is general in nature and readers should seek professional advice specific to their circumstances. Need help with your financial your financial future, we think we’re Australia’s top financial adviser.
