The Conglomerates Sector has lost 20% of its collective market capitalization in the last 12 months. 50% of this loss was during April of this year alone. A principal advantage of mixing varied lines of business together is to beat economic downturns. Is this financial strategy a failure?
Find the true answer by sifting through the micro. Take for example, the case of John Bean Technologies Corporation (NYSE: JBT). The stock of this small-capital member of the Conglomerates Sector from Chicago, IL has jumped 13% in the second fortnight of August 2008. The Price to Earnings Ratio remains at just 6.79 even after this appreciation.
Business progress is sustained and a way of life at this corporation. Earnings per Share have grown annually by 62.50% during the most recent quarter. The Quick Ratio is at less than 1.00 even though the company is engaged in very different lines of business. The company is also free of debt.
The management has chosen food processing and air transportation as the two types of industrial clients it serves. It provides technology solutions. The management courts a variety of clients including top corporations and the U.S. military. It is careful to stay away from the core competencies of its customers, focusing instead on productive and reliable ancillary services. This example proves that a well-managed conglomerate is not unlike a personal stock portfolio.
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