No Such Thing As A Doomed Industry?

It's not exactly the kind of prospect you'll hear just anywhere. But the idea that there's no such thing as a doomed industry holds some merit.

We all know there are just some industries that are better than others. No one wants to hold stock in Joe's Buggy Whip Company, for obvious reasons. And transport firms and airlines often have hot competition and require lots of capital to run, keeping down returns for investors.

But even these seemingly bad buys could be good in the longer term. Buying a stock today in a troubled industry doesn't preclude that the industry--or the company--will be troubled forever. You have to do your due diligence, naturally, but the possibilities present themselves.

Let's consider my earlier example of Joe's Buggy Whip Company. No one wants buggy whips any more because those darned internal combustion engine vehicles keep taking all the horse business away. So the price of the company is down--it's rock bottom. But Joe's got a plan to alter his buggy whips into Venetian blind cords and garage door opener cables, the kinds of things that are still very useful and very much in demand. So now, your investment in Joe's Buggy Whip Company might be in a much better position than you expected, and the stock will in turn look a lot more attractive and realize capital gains.

It's why you have to keep a constant watch on the market if you go investing--sometimes the best stocks to get into are the ones that no one else will touch.