Is It Time For Investors To Abandon Powerful Conglomerates?

With Johnson & Johnson the latest company to announce a split, we take a look at whether the days of the global conglomerate are truly over.

Nov. 19, 2021

What do Johnson & Johnson, Toshiba, and General Electric all have in common? 

No, it’s not shady business practices! It’s that they’re all splitting off their businesses in a trend that seems to be sounding the death knell for multinational conglomerates around the globe.

The Conglomerate is dead…long live the Conglomerate?

Let’s not react too hastily though, there might be more to this than meets the eye. A common trait shared by these companies is that they have spread themselves across numerous industries. These splits allow the companies to simplify and refocus around a singular market. While these titans of industry continue to fall, however, the obituary for the modern conglomerate might not be needed just yet.

If we look at the tech industry, we see everything moving in the opposite direction. Google’s rebranding to Alphabet group has seen it rewarded drastically. Facebook is following suit by transitioning into Meta. What we’re seeing is a monumental shift in how two very disparate markets are moving. Industry is simplifying and jettisoning the dead weight to attempt to remain profitable. Tech is expanding and attempting to spread into all aspects of our daily lives.

As investors, we’re left to navigate a world mired in uncertainty. Will any of these tech conglomerates reach the heights that General Electric saw in the early 2000s as the undisputed most valuable company in the world? Will the transitioning industry giants be able to redirect and regrow to their former heights?

The answer is decidedly uncertain. As these two industries continue to diverge there will no doubt be winners and losers. The key, it seems, will be figuring out who can adapt the quickest.

One way to protect your portfolio from the dangers of ever-changing industry is to diversify, which you can learn all about on our blog.