Diamonds Are Forever, Businesses Are Not

We were somewhat surprised to see this graphic from Innosight on the short lifespan of America’s largest companies, the BlueChips of the S&P 500 index.

In our mind, the largest and best companies surely had been around for a long period of time— and most would be around for a long time. But, that is not the reality of the 21st Century. Diamonds are forever, but America’s best businesses are having shorter and shorter lifespans. In 2018 the lifespan was 22 years and projected to decline to 12 year lifespans by 2027.

Going down nostalgia lane, these were once America’s hottest Stocks. If you bought them at the right time, you could have profited well. But, owning them on the way out of business is a disaster. Here’s a list of bankrupt, defunct or corporations that are mere shadows of their once successful and dominant companies.

• J. Crewe
• Gold’s Gym
• Bealls, Goody’s, Palais Royal
• Pier 1 Imports
• Hertz
• Tuesday Morning
• 24 Hour Fitness
• Lord & Taylor
• Stein Mart
• Sizzler
• Ruby Tuesday’s
• Sears
• J.C. Penneys
• Lehman Brothers
• Polaroid
• Blockbuster
• Too many failed energy companies to list.

There was a time when it seemed absolutely unfathomable that large, entrenched companies could see their corporate advantages slide away.

In 1964, the average tenure of a company on the S&P 500 was 33 years, but this is projected to fall to an average of just 12 years by the year 2027 according to consulting firm Innosight.

At this churn rate, it’s expected that 50% of the S&P 500 could turnover between 2018-2027.

Keep an eye on the rapidly growing list of 2020 corporations declaring bankruptcies due to the Coronavirus Pandemic. Failing corporations create a domino effect of Stockholders losing all their money, employees laid off, banks don’t get their loans paid, landlords lose their tenants, and cities lose out on taxes.

Every time you pass by an empty storefront or see a FOR LEASE sign remember the domino effect that echos through the economy and tends to drag out recessions.

US corporate bankruptcy count in 2020 nears 500 as filings continue to climb

Courtesy S&P Global Market Intelligence