The Company when It's Old (3): Why you might invest in these?

By now you might be wondering what's the point of investing in a stodgy old company such as IBM, GM, or US Steel? 

There are several reasons you might do this. 

• First, big companies are less risky, in that they generally are in no danger of going out of business.
• Second, they are likely to pay dividend.
• Third, they have valuable assets that might be sold off at a profit.

These corporate codgers have been everywhere and seen it all, and they've picked up all sorts of valuable property along the way.  In fact, studying an old company and delving into its finances can be as exciting as rummaging through the attic of a rich and elderly aunt.  You never know what amazing stuff you'll find stuck in a dark corner.

Whether it's land, buildings, equipment, the stocks and bonds they keep in the bank, or the smaller companies they've acquired along the way, old companies have a substantial "break-up value."  Shareholders act like the relatives of that aged rich aunt, waiting to find out who will get what.

There's always the chance an old company can turn itself around, as Xerox and American Express have been doing in the past couple of years.

On the other hand, when an old company falters or stumbles as badly as these companies did, it may take 20 or 30 years before it can get itself back on track.  Patience is a virtue, but it's not well rewarded when you own stock in a company that's past its prime.