The worst companies in America have been great investments

By Investing Basics Consumer Reports

Is being bad better than being good? Our sister website, The Consumerist, annually selects the year's most ignoble companies, and after taking a look at the stock performance of their leading contenders, the answer would seem to be yes.

Continue Reading Below

Academics have long suspected that respected companies may not always be the better performers in a stock portfolio. This suspicion was born out in a 2010 study of Fortune Magazine’s most admired companies, which concluded that the more admired the company, the less you can expect from its stock performance. In fact, as a whole, the less-than-admirable companies outperform. But because the returns of these companies widely vary, an investor would have to purchase at least dozens of these stocks to capture the outperformance.

But those researchers didn’t have the collective wisdom of an annoyed consumer base to tap. We do.

The Consumerist's sixth-annual “tournament,” in which readers determine which store, service, or bank, is, unequivocally, The Worst Company in America, is being held this month. Thirty two unpopular companies were seeded, and with a draw kind of like the NCAA basketball tournament's, readers decide which of two companies is worse. The "winner" advances to the next round.

We took a look at the returns of the most despised companies since 2009, and although admittedly a small sample, the results are undeniable. With $10,000, we “purchased” equal amounts of the four most-hated companies on March 31 of each tournament year, and compared the returns to that of an investment in a Standard & Poor's 500 index exchanged-traded fund. The results are below:

 

Continue Reading Below

Year (Worst 'Final Four' Companies ) $10,000 invested in:
The Worst S&P 500
2009 (AIG, Bank of America, Comcast, Live Nation)  

$45,257

$25,742

2010 (Bank of America, Comcast, Live Nation)*

$18,191

$17,213

2011 (Bank of America, BP, Comcast, Live Nation)

$17,623

$14,896

2012 (AT&T, Bank of America, Electronic Arts, Walmart)

$14,692

$13,737

2013 (Bank of America, Comcast, Electronic Arts, Live Nation)

$15,155

$12,070

*Cash4Gold was a final four company in 2010, but was not publically traded. Total Returns through February 2014.  

 

The despised did quite well. Depressingly well. Evil-villain-cackling well. Duke could take some lessons from them.  

Not every company is doomed to eternal damnation by Consumerist's readers: Last year’s champion, Electronic Arts, was just dethroned by Time Warner Cable. Nonetheless, there is a persistance among certain companies. Bank of America, Comcast, and Live Nation (parent company of Ticketmaster) tend to reach the latter stages of the tournament every year. These perennials been good investments, faring even better than the outstanding results from U.S. stocks overall over the last five years. Still, we're not ready to buy an ETF based on companies that let down consumers.

—Chris Horymski

Copyright © 2005-2014 Consumers Union of U.S., Inc. No reproduction, in whole or in part, without written permission. Consumer Reports has no relationship with any advertisers on this site.