From alpha to omega
Conglomerates are back in fashion, but only the best will thrive
FEW management fashions have waxed and waned quite as dramatically as that for conglomerates. From the 1960s to the 1980s business gurus praised conglomerates such as ITT of America and Hanson Trust of Britain as the highest form of capitalism. Today they routinely dismiss them as bloated anachronisms. Companies should stick to their knitting; investors should minimise risk by investing in a portfolio of companies rather than backing corporate megalomaniacs. Peter Lynch, an investment guru, talks about “diworsification”. Stockmarkets routinely apply a sizeable “conglomerate discount” to diversified companies.
This article appeared in the Business section of the print edition under the headline “From alpha to omega”
From the August 15th 2015 edition
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