Not Every Company Can Weather the Test of Time
Not every company proves to be a good investment, in fact, many make horrible investments. The chart below is just a small fraction of companies that have not come back from their highs. Many well-known companies that we all use every day have not fared well, companies like Boeing, Citigroup, Zoom, Perrigo, & Intel just to name a few.
Fallen Stocks Will Not Always Bounce Back
Boeing has struggled for 10 years to get back to its all-time high, Citigroup has been challenged for over 15 years, and Intel for 25+ years. Boeing is off almost -60% from its high, Citigroup is down -87% and Intel is off -73%. Newer companies like Zoom and Peloton are off -85% and -94% respectively.
Why is this?
The business world is hyper competitive.
Companies face unique challenges, things like disruptive competition, mismanagement, changing consumer preferences, or technological obsolescence that can permanently diminish a company’s value.
Do you remember Kodak or Blockbuster, they famously failed to adapt and subsequently failed. What about Lehman Brothers and Bear Stearns during the financial crisis, or the fraudulent company Enron? The list is long.
The cemetery is filled with companies that didn’t make it.
Investors must recognize that holding onto a struggling company with the hope that its stock will rebound can lead to even further losses and lost opportunities. The market rewards adaptability, innovation, and growth…and not every company can or will be able to achieve this.
Avoid companies that are not able to adapt, innovate, and grow.
No company is immune from deterioration or even extinction. “Fallen Stocks Will Not Always Bounce Back.” The Risk is Real.
-Paul R. Rossi