Conglomerates
This category includes diversified industrial giants (like 3M or Honeywell) that operate multiple, unrelated business lines under a single corporate umbrella to smooth out economic volatility.
Why it exists
Conglomerates exist to own and operate diverse businesses under one parent company, leveraging capital allocation skill, scale advantages, and risk diversification.
Why it’s necessary
They can stabilize earnings, reallocate capital efficiently across business cycles, and support subsidiaries with centralized resources and management expertise.
Key components
Multi-industry portfolio
Centralized capital allocation
Shared corporate functions
Acquisition & divestiture strategies
How to evaluate businesses
Conglomerates are judged by capital allocation discipline, return on invested capital, portfolio synergy, transparency of segment financials, and long-term restructuring capability. Weak conglomerates suffer valuation discounts; strong ones outperform markets.
How the industry could be improved
Better segment clarity, divestiture of low-ROIC units, disciplined M&A frameworks, and real-time capital reallocation models could restore investor trust and improve valuations.