Here's How Investing in Companies You Hate Can Make You Rich

by Tim Lemke on 11 August 2014 2 comments

It's often been said that one simple and effective investment strategy is to invest in companies you know and like.

This is a good approach to getting a solid return on your portfolio, but it's worth noting that investors can also make money taking an opposite approach. (See also: Here's How Investing in Companies You Love Can Make You Rich)

Strange as it may sound, "buy what you hate" may also be an effective investment philosophy when you examine the long-term investment gains on companies with negative reputations.

Simply put: A company's popularity (or lack thereof) is not always reflected in its balance sheet. In fact, some companies may make great investments due to their ruthless focus on profits above most other considerations. Moreover, some companies may be disliked because of their dominant position in the market.

Here's a look at some companies that many Americans seem to hate, but that still offer better-than-average investment returns.

Your Cable Company

On the popularity scale, cable companies rate somewhere in between dentists and waiting in line at the DMV. A typical person's Facebook feed is likely rife with complaints about high prices and shoddy customer service their local cable TV co provides. In fact, Comcast [NASDAQ: CMCSA] and Time Warner Cable [NYSE: TWC] were recently named two of the most-hated companies in America by the University of Michigan's Ross School of Business.

But if you've invested in either of these companies, you probably have made out very well, as they offer television and high-speed Internet services that many Americans can't seem to live without.

Comcast started out as a small cable provider in Philadelphia and is now one of the nation's largest companies, with revenues of more than $64 billion in 2013. Its share price has risen 200% since 2004, compared to 130% for the NASDAQ as a whole.

Since being spun off from Time Warner in 2009, Time Warner Cable has seen share prices rise nearly 400%.

Comcast in February announced it would seek to buy Time Warner Cable in a $45 billion deal that is pending regulatory approval. If it goes through, expect shareholders to make out well.

Other cable companies including Verizon [NYSE: VZ] and AT&T [NYSE: T] have lagged behind the S&P 500, but offer some of the highest dividends around.

Exxon Mobil [NYSE: XOM]

This company gets blamed for everything from global warming to the high cost of gasoline. But even as Americans are starting to drive less and use more fuel-efficient cars, ExxonMobil has continued to rake in the dough, reporting revenues of $420 billion in 2013. Share prices have risen more than 125% in the last decade, well outpacing the S&P 500.

Halliburton [NYSE: HAL]

Often ranked among America's most hated companies, Halliburton was criticized after being awarded a multi-billion dollar contract for work related to the Iraq war. It also pleaded guilty to destroying evidence related to the Deepwater Horizon explosion in 2010.

But controversy has not been bad for investors. Halliburton, which offers products and services for the oil and gas industries, has seen its stock price rise nearly 340% in the last decade.

Monsanto [NYSE: MON]

This St. Louis-based company is the world's largest producer of seeds, and has engineered patented products resistant to herbicides. But it is enemy number one among those opposed to genetically modified foods. Decades before entering the seed business, it produced controversial chemical products including DDT.

But hated or not, Monsanto has grown acres and acres of money for its investors.

Despite a growing movement toward organic foods, Monsanto has seen profits soar and in the last ten years, the company's stock has risen nearly 600%.

Tyco International [NYSE: TYC]

In the early part of the last decade, Tyco was the poster child for ugly corporate excess.

In 2002, then-CEO L. Dennis Kozlowski was forced to resign after throwing a massive birthday party for his wife, complete with an ice sculpture of Michaelangelo's David and a private concert from Jimmy Buffett. He was later convicted in 2005 of crimes related to an unauthorized bonus of more than $80 million. (He was released from jail this past January.)

It was an ugly period for the company, but investors who hung on to shares of Tyco since then have been rewarded. Tyco International has been split numerous times in the last decade, with investors winding up with shares of several well-performing companies including Pentair, TE Connectivity, Covidien, and ADT. Investors can now boast of a diverse set of holdings that includes exposure the industrial supplies, electronics and medical device industries.

Tyco is an example of how corporate scandals are not always an indicator of the strength of a company's underlying business.

McDonald's [NYSE: MCD]

Opinions about McDonald's are certainly mixed, at best. The fast food chain has been blamed for everything from the nation's obesity problem to keeping wages low for workers. But it's still the beefiest restaurant chain in the world, serving 68 million customers a day. McDonald's remains one of the most valuable brands in the world, and pulled in $28 billion in revenue in 2013. In the last decade, McDonald's shares have gone up 250%.

Would you ever consider investing in a company you hate?

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Agree with all these except McDonalds. Typically the companies we hate as consumers are very complex, high CapEx companies. Infrastructure is king! AT&T is my largest non-fund holding even though I don't necessarily like being a customer of theirs. Why? You know they're not going to disappear over night AND they pay a huge dividend.

Jay

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Guest

This may be the worst, most soul-sucking article I've ever read on WB. To invest in a company like Comcast that yes, I do hate is one thing. I hate them because they are awful at what they are supposed to be doing. Their customer service is laughable. They aren't worth the money, etc. But I am not morally opposed to them; they just stink. Monsanto on the other hand seems to be out to destroy the world. I am morally opposed to everything they do, everything they stand for. To support them in any way would be selling a little piece of my soul. I'd rather be poor than support the devil. My soul is worth more.