A look at the companies that prospered during the great depression, recession proof your investments
Today, we are facing very similar economic situations to that of our past. By learning about our past, we can better understand our current economic crisis, and help make predictions about our future and with whom to invest our money. Over the last century, one of the United States most trying and difficult times was during the Great Depression of the 1930’s. By looking at the companies that weathered the storm, we can better understand why some companies stay afloat and sometimes succeed, while other businesses fail and often quite miserably. Below, I will take you through my thoughts and research regarding how to best accomplish this task, along with my findings, I’m certain you will find this information very valuable.
I wanted to accomplish the following with my research;
- Identify major companies/businesses/industries that made it through the great depression when financial times were at there worst
- Figure out what was hot, popular, and profitable in the 1930’s and see who the present day companies are that do the same.
- Figure out what companies profit in time of war and shortly after.
In attempting to identify the major companies that weathered the great depression I decided it was best to look at those major companies tracked on the Dow Jones Industrial Average. I did this because the Dow Jones tracked only the largest American Industrial corporations and their stock prices. If a company became too small, it would be delisted, and either failed or wasn’t longer much of an economic force on the economy with regards to jobs, etc. Basically, my thinking was that if they remained on the list over the years, the companies stock price remained strong enough, and they were the most profitable companies of that time. (Taking a look at the companies that made up the DJIA from the late 20’s to the late 50’s, shows us a timeline of which of the largest companies weathered the storm of the great depression. Below is the list of companies that were listed as part of the DJIA in that timeframe that remained on the list over the years:)
From the above linked list, I looked at the companies that remained on the list at least 10 times, below I will discuss what they made and did that allowed them to make it through the storm of the great depression, and they are as follows:
Allied Chemical: “Allied is a holding company whose operations may be divided into five groups: The Solvay Process Division produces soda ash and caustic soda. The General Chemical Division makes sulphuric acid, nitric acid, hydrochloric acid, acetic acid and related products. The business of this division is steady, does not promise great expansion, must be considered a valuable backlog. The Barrett Division is primarily in the coal tar business. Coal tar is used for dyestuffs, drugs, synthetic plastics, wood preservatives. The residue goes into roads and roofs. This division makes Tarvia, one of the few Allied products known to the public. The National Aniline & Chemical Division makes dyestuffs. It is thought to contribute little to Allied’s net. The Atmospheric Nitrogen Division. A justification of all of Allied’s policies is the success it has had in the production of synthetic nitrogen. The War found the world dependent upon Chile’s natural nitrate. Germany met the problem by developing synthetic nitrogen, and Allied’s accomplishments in the same direction have made the U. S. independent of other countries for this chemical valuable in peace, invaluable during war.”
The above information was found on this TIME artilce from the early 1930’s.
- Allied has since been acquired by a few different companies, most recently Honeywell, whom, ironically dropped off of the DJIA in February 2008. The most important thing to take from this company, in my opinion, would be this company was responsible for much products that went into building infastructure (roads, homes, factories, buildings, etc.) and aiding in products that would supply chemical weapons for war.
American Can: “This container industry giant was created in 1901 through the merger of dozens of plants around the country, including some in the Chicago area. Although it was not headquartered in Chicago, American Can became an important actor in the local economy during the early twentieth century. From the beginning of the century through the 1970s, the company employed thousands of men and women (the local workforce stood at about 2,700 in 1934 and 3,000 in 1974) at several plants around the city. During the final decades of the century, American Can diversified, became less important as a local employer, and eventually ceased to exist as an independent entity. ” This information was found here.
- As you can guess, canned food became big business, and they were able to do well when others couldn’t. Similar businesses today may include Coca-Cola Bottling and I’m certain PEPSI has their own operations to, this would be something to further investigate.
American Smelting: According to wiki: ASARCO LLC is a mining, smelting, and refining company based in Tucson, Arizona that mines and processes primarily copper. The company, a subsidiary of Grupo México, is currently in Chapter 11 bankruptcy. ASARCO plans to emerge from bankruptcy in 2008, and opposes calls for it to totally liquidate its mining and industrial assets. Its three largest open pit mines are the Mission, Silver Bell and the Ray mines in Arizona. Its mines produce 350 to 400 million pounds of copper a year. ASARCO conducts solvent extraction/electrowinning at the Ray and Silver Bell mines in Pima County, Arizona and Pinal County, Arizona and a smelter in Hayden, Arizona. Before its smelting plant in El Paso, Texas was suspended in 1999 it was producing 1 billion pounds of anodes each year. Refining at the mines as well as at a copper refinery in Amarillo, Texas produce 375 million pounds of refined copper each year. ASARCO has 20 superfund sites across the United States, and it is subject to considerable litigation over pollution. India based Sterlite Industries announced the acquisition of Asarco on 31st May, 2008 for US$2.6 billion. Sterlite woul become the world’s third largest copper miner with a combined capacity of 650,000 tonnes a year, if the Asarco deal closes. Grupo Mexico, the current owner, opposes the sale, and hopes to block it .”
- Non-Ferrous metal proves valuable in times of recession, just as gold has proved to be a hedge against a falling US dollar.
American Tobacco: “The American Tobacco Company was founded in 1890 by J. B. Duke as a merger between a number of tobacco manufacturers including Allen and Ginter and Goodwin & Company. The company was one of the original 12 members of the Dow Jones Industrial Average in 1896. Akin to the domination of Standard Oil in the same era, the American Tobacco Company dominated the industry by acquiring the Lucky Strike Company and over 200 other rival firms. The company built processing plants and warehouses in Reidsville, North Carolina and Durham. Antitrust action begun in 1907 against the American Tobacco Company, which broke the company into several major companies in 1911. Those companies include: American Tobacco Company, R. J. Reynolds
Liggett & Myers Tobacco Company, and Lorillard. The American Tobacco Company, which started acquiring a wide range of non-tobacco products during the 1970s and 1980s, renamed itself to American Brands in 1986, which has since renamed Fortune Brands. American Tobacco became a subsidiary of American Brands for the next ten years until the company shed its tobacco brands to competitors.” Find this and more here.
- The tobacco industry is still strong, however, they continue to face litigation that threatens their future.
Bethlehem Steel:”The Bethlehem Steel Corporation (1857–2003), based in Bethlehem, Pennsylvania, was once the second largest steel producer in the United States after Pittsburgh, Pennsylvania-based U.S. Steel. After a decline in the U.S. steel industry and management problems leading to the company’s 2001 bankruptcy, the company was dissolved and the remaining assets sold to International Steel Group in 2003. In 2005, ISG merged with Mittal Steel, ending U.S. ownership of the assets of Bethlehem Steel.
During its life, Bethlehem Steel was also one of the largest shipbuilding companies in the world and was one of the most powerful symbols of American industrial manufacturing leadership. Bethlehem Steel’s demise is often cited as one of the most prominent examples of the U.S. economy’s transition away from industrial manufacturing and its inability to compete with cheap foreign labor.”
Chrysler manufactures vehicles, in recent news they are being severely and adversely affected by oil prices and their business continues to suffer.
General Electric Company:
Aircraft Jet Engines
Medical Imaging Equipment
General Foods:“In November, 1985 General Foods was acquired by Philip Morris Companies (now Altria Group, Inc.) for $5.6 billion, the largest non-oil acquisition to that time.” General Foods, as you guessed, was a major food manufacturer and restaraunt chain owner.
1953 – General Foods acquired Perkins Products Company, maker of Kool-Aid.
1957 – The company introduced Tang, which became available nationally two years later.
1964 – General Foods introduced Maxim, the first American brand of freeze-dried coffee.
1968 – General Foods makes its ill-advised purchase of the Burger Chef fast-food chain.
1969 – General Foods buys Rax Restaurants.
1971 – General Foods acquired the maker of Gevalia.
1978 – General Foods sells Rax Restaurants to Rac.
1981 – General Foods acquires Oscar Mayer & Company.
General Motors Corporation: “is engaged in the worldwide development, production and marketing of cars, trucks and parts. The Company develops, manufactures and markets vehicles worldwide through its four automotive regions: GM North America (GMNA), GM Europe (GME), ” per their company website.
International Harvester:“now Navistar International Corporation) was an agricultural machinery, construction equipment, vehicle, commercial truck, and household and commercial products manufacturer. It was the result of a 1902 merger between the McCormick Harvesting Machine Company and Deering Harvester Company, along with three smaller agricultural equipment firms: Milwaukee; Plano; and Warder, Bushnell, and Glessner (manufacturers of Champion brand). International Harvester sold off the Ag division in 1985 and later renamed the company.” Per wiki.
International Nickel:“In 1902 the International Nickel Company, Ltd. was created in Camden, New Jersey as a joint venture between Canadian Copper, Orford Copper, and American Nickel Works. In 1916, the International Nickel Company of Canada, Ltd. was incorporated as the operating company in Copper Cliff near Sudbury, and in 1918 the company built a new refinery in Port Colborne. The International Nickel Company of Canada, Ltd., first began using the trade name Inco in 1919. In 1929 the corporation underwent a major expansion by absorbing the British-owned Mond Nickel Company. A head office was established in Toronto. During World War II, Inco’s Frood Mine produced 40% of the nickel used in artillery by the Allies. In 1972 the Inco Superstack was built in Sudbury. In 1976, the company’s name was officially changed to Inco Limited. In order to generate cash Inco sold its manufacturing sites of nickel alloys to Special Metals Corporation in 1998. Special Metals Corporation however filed Chapter 11 in March 2002.”
Find more about them here.
As mentioned above, these guys profited from war.
Johns-Manvile: “Johns-Manville is an American corporation involved in the manufacture insulation, roofing materials, and engineered products. The stock was included in the Dow Jones Industrial Average from January 29, 1930 to August 27, 1982.”
Sears Roebuck & Company:is an American mid-range chain of international department stores, founded by Richard Warren Sears and Alvah Roebuck in the late 19th century. They’ve since merged with KMART.
Standard Oil (N.J.): was a predominant American integrated oil producing, transporting, refining, and marketing company. Established in 1870, it operated as a major company trust and was one of the world’s first and largest multinational corporations until it was broken up by the United States Supreme Court in 1911. John D. Rockefeller was a founder, chairman and major shareholder, and the company made him a billionaire and eventually the richest man of all time. More here.
Texas Company: This company is now known to you and I as Texaco. You probably know what they do, if not check here.
U.S. Steel: “is an integrated steel producer with major production operations in the United States and central Europe.”
Union Carbide:gave birth to the modern petrochemicals industry. This is another huge chemical company.
Westinghouse Electric: Some cool facts from wiki:
1920s – enters the broadcasting industry, with stations like KDKA in Pittsburgh, Pennsylvania and WBZ (AM) in Massachusetts
1930s – enters the nuclear age with an industrial atom smasher.
1934 – opens its Home of Tomorrow in Mansfield, Ohio, to demonstrate Westinghouse home appliances
1935 – completes longest continuous electric steel annealing furnace in the world at Ford Motor Company, Dearborn, Michigan
1930s – funds invention of the magnetohydrodynamic generator
Close up of Westinghouse logo on historic kitchen stove at John & Mable Ringling Museum, Sarasota1940s – enters aviation with airborne radar (defense electronics sold 1996), jet engine propulsion, and ground based airport lighting.
1941 – after years of resistance to the unionization efforts of its employees and to the National Labor Relations Act, signs a national labor agreement with the United Electrical, Radio and Machine Workers of America after a US Supreme Court decision that upheld the Act.
1945 – renames itself the Westinghouse Electric Corporation, and makes first automatic elevator.
Woolworth: was a retail company that was one of the original American five-and-dime stores, who later grew into one of the largest national retail chains until it could no longer compete. More here.
After looking at these companies above it has become apparent during that stock crash, recession, war and economic downturn, the following companies remained the strongest and most profitable (keep in mind we are talking about the largest public companies, not necessarily all companies including privately held ones):
Natural resources like oil, mining of different precious metals (such as steel, copper, nickel, etc.)
Discount retail stores
Machinery and Equipment construction
Now, would this list relate well to todays markets? Maybe in some regards, but in various other ways not so much. As you know, a few of the major companies listed above are in dire financial positions today, as the market has completely changed (and the American car manufacturers are losing because they are not competitive globally among many other things).
Having kept the above in mind; I would think the best companies to invest in now (in times of war, recession, and bear markets) would be the following:
Keeping in mind that a company still has to be managed properly in order to be profitable, my suggestion would be to invest in companies that produce or supply:
Household goods: (like Proctor and Gamble), Discount grocery and retail stores (like Aldi, Wal-mart, Target, Sears).
Oil Companies: (if there isn’t already a huge bubble in the market that is ready to pop)
Private label companies: (I’m certain that the branded companies will have a harder time selling their goods when there are cheaper alternatives)
Alternative Transportation companies: Over the road truckers might be in for a real shock if they havn’t experienced it already at the pumps, I’m guessing as they lose the ability to make transporting profitable, rail companies will get their business. As oil prices continue to rise, flatcars pushing containers will become common place again.
Low cost providers: People will lose an appetite for extras when it comes down to it. Seek those companies that are generic and cost efficient.
Aerospace companies- and companies whom make defense systems.
War Weapons, artillery, machinery and equipment- There is no telling if the war mongers will continue their invasions, if the liberals have anything to do with the prevention, you can probably count on it.
Now, you may look at some companies I am mentioning, for example food companies, and see that they’re losing money recently. Well, this has to do with their ability to pass rising comodity prices to the consumer quickly enough. Once they’ve stabilized their cost pass through, these companies will post nice gains.
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