Historically speaking, when a company or brand made it to the status of being a household name, it was quite common to invest in the company without a substantial investment strategy due to the trust in the brand. This strategy is an important pitfall of stock investors that new investors need to be aware of in order to protect their portfolios of when a major corporation may be bankrupt. Additionally, it is important to look to many globally diverse markets other than the United States such as China, to examine a wide range of investment portfolio options for ultimate earning potential.
By using this technique, it will be possible to build a portfolio that has substantial not only short term, but long term returns as well. This strategy is a great way for investors to maximize the best returns out of their investment capital. In order to learn more about major corporate failures and important words of wisdom to investors, analyze the information below:
10 Household Names that Went Out of Business
It is very unusual; however, it does happen when a major brand goes out of business. Many times, these cases are due to poor management at the senior level. Here are ten examples of major household name companies that have gone out of business and their causes for doing so:
TWA is a great example of a company that excelled in the beginning, became a household name, and then was won by Carl Icahn in 1985 by a hostile takeover. Once Icahn acquired the company, he privatized it, pocked substantial profits in excess of $500 million and then sold the company in debt. The situation led to TWA declaring bankruptcy and being purchased by American Airlines in 2001.
Arthur Anderson’s downfall was tied to their involvement in the Enron scandal. Previously, they had been a member of the “Big 8” accounting firms. By being Enron’s auditor, it used its credibility to facilitate special purpose entities that engaged in many illegal accounting practices. Their failure resulted in the loss of 85,000 jobs.
General Foods Corp
General Foods Corp. is an example of how a top food company with well-known brands can be acquired by a competitor. General Foods Corp. had products such as: Tang, Kool-Aid, and Oscar Mayer. Philip Morris later acquired General Foods Corp.
Standard Oil was the largest oil company in the world until the Supreme Court held in 1911 that the company violated the Sherman Anti-Trust Act of 1890 by using exceedingly low prices to wipe out its competition. Subsequently, the company was broken up to be Chevron, Exxon Mobil, and ConocoPhillips.
Pan Am was a cultural icon in the age where traveling on airlines had a sense of elegance and sophistication. Pan Am made several poor financial decisions in their senior management, which made the airline subsequently file for bankruptcy.
Enron had 22,000 employees and filed revenues of $111 billion, which caused their accounting fraud to become apparent. It is one of the largest cases of fraud, corruption, and bankruptcy in U.S. history.
Woolworth’s was a company that capitalized on the idea of an American shopping mall with many stores in one place. They expanded too quickly by acquiring Kinney Shoes, Champs Sports, and Foot Locker. Woolworth’s stores subsequently disappeared and now the company was acquired by additional investors and renamed Foot Locker.
MCI WorldCom specialized in long distance call discount services; however, the telecom industry began to have a downturn. As a result, management tried to use fraudulent accounting practices to keep the stock afloat. MCI WorldCom filed for bankruptcy and was later acquired by Verizon.
Compaq was a famous computer company and had one of the largest inventories of PCs in the 1980’s – 1990’s. Compaq was then purchased by HP to grow their market share substantially to compete with growing competitors in the computer industry.
Merry-Go-Round was successful on Wall Street and sold shirts, sweaters, V-neck sweater vests, and rayon blouses. Merry-Go-Round is a great example of a clothing company that had its height during a fashion trend and then did not keep engaging its consumers. As a result, it filed for bankruptcy in 1994 due to lack of interest and sales from its customers.
Words of Wisdom to Investors
With the many investment options available, it is important for investors to be quite selective about how they are diversifying their portfolios. There are many common pitfalls that can be avoided by being properly informed. For example, merely investing in a company because it has a “big name,” is not wise because that status could easily change due to poor management. One of the primary strategies that investors should place importance on is creating a long-term strategy that is consistent and sticking to that strategy. By merely chasing “hot tips,” it can be ineffective and derail an investor’s portfolio from their long-term investment goals. Lastly, it is important for investors to be very selective about who is managing their portfolios. Failure to select the right portfolio manager can be detrimental to an investor’s portfolio.
Concluding Remarks on the Subject
It is important for investors to be aware of major corporations that have failed. It is also important for investors to consider investing their capital on many different stock markets around the globe. By doing so, they will be able to have a more diverse portfolio. For example, China is an incredible market to watch as it is seen to have an even more expansive economic landscape by 2030. China’s investment in healthcare and technology alone will catapult their profitability substantially in the years to come. Investors should be prepared to have a long-term strategy that will allow them secure and informed investment practices for the best returns. By knowing the full background of each investment, investors will be able to make sound decisions to grow their net worth in the longer term.