This post was part of AOL Money & Finance's Best & Worst of 2007 feature. The voting has now closed and readers have chosen ExxonMobil as the most hated company of the year. Be sure to let us know in the comments if you are pleased with this result.
Trying to discuss the Most Hated Companies is not easy. There are so many to choose from that if we left the subject wide open it would fill a novel. The four companies that made our list are all substantial in size and that alone brings much criticism. These four companies and their stocks are all broadly covered by Wall Street and business journals everywhere. We at BloggingStocks have written dozens of stories about them in just the past year alone. Each time we do, we find that our readers have plenty to vent about, so here we are giving you all one more chance.
Three of the four stocks here have not paid off for shareholders, and that is bound to start the ranting and raving. All of them have created some consumer backlash, and even fury. Some people hate the management. But management hating is not the problem at the worlds largest company, Exxon Mobil, since it is up about 200% in the past five years.
Bank of America (NYSE: BAC), capitalized at about $190 billion, was neck and neck with Citigroup (NYSE: C) as the largest financial institution but, at least for now, it has remained atop the heap while Citi has become a fallen (think questionable loans and billions in write-downs) angel capitalized at $150 billion. Bank of America has grown by mergers and acquisitions over the last decade. It was acquired by or merged with NationsBank Corporation, depending on your perspective, kept the BoA name but moved its headquarters to North Carolina from California. This was followed by the acquisitions of Fleet Boston, MBNA, US Trust, ABN Amro North America, and LaSalle Bank, and most recently an investment in Countrywide Financial (NYSE: CFC).
All of these changes affected millions of customers that had prior business relationships with the predecessor companies. It is only natural that B of A move these new customers to their existing business platforms and change the previously excepted customer patterns. This caused some grief and many complaints. B of A also has had to contend with its own customers that have complained about all the new fees and charges that keep popping up on their monthly statements. While this is true of most banks, B of A is leading the charge, and often takes the brunt of the criticism.
Bank of America has not been untouched by recent debacles in the financial sector related to industry lending practices, questionable mortgages, and the ensuing writedowns, but they have fared better than most. The stock had been up over 50% during the last five years, but has dropped recently. The entire sector has been underperforming the overall market, and looks like that will continue to do so. Some contrarian investors are starting to take a look at this sector, although most have suggested they will stay on the sidelines for now.
Given the stock performance, the size of the company, the increase in fees and altering of business practices, there is much to complain about. However, Bank of America pays a handsom dividend yield of about 6%, has the stability of a wide footprint, and has given no signs that it is through looking for new areas of growth. It is probably one of the safest bets (famous last words, I know) in the financial sector.
Exxon Mobil (NYSE: XOM) cannot escape the wrath of anyone. Well I guess there are exceptions, that would be shareholders and the Bush Administration. Consumers, on the other hand, hate it with a capital H. Every time gasoline prices go up, the population becomes restless. Every time corporate profits and executive pay are announced, people become disgusted. When these things happen in concert ... well, you can make up your own adjectives, but they're not pretty. Now add issues of hydrocarbon emissions, global warming, foreign intrigue, energy tax breaks, and oil industry subsides, and people can get downright nasty.
All that said, XOM has outperformed most stock investments you could have made over the last five years, gaining about 125%, while paying a dividend and with little downside risk. Because of its giant shadow it remains a Wall Street darling even if this makes most people think of it as having a dark side.
Home Depot (NYSE: HD) has been trying to ride out the center of the storm for a couple of years now. It has had to deal with the housing market implosion, competition from a formidable opponent in Lowe's (NYSE: LOW), complaints about shabby stores, poor customer service, and management has lost most of its credibility. It has also suffered from "Big Box" syndrome like others of its ilk, and all this has led to a stock price that has been going down all year, losing about 30% of its value.
It started the year trading near $40 and is trading in a $27 to $28 range lately, making shareholders none too happy either. But they say things seem darkest right before the dawn, and Home Depot has maintained reasonably strong cash flow though all its difficulties and holds an abundance of powerful assets. Prime among these assets is its real estate accumulated at good prices over the past ten years. Several things are working in Home Depot's favor going forward, although the market will choose to ignore these things for now.
The market will improve eventually for housing, and this will help immensely. Nothing will restore the company's reputation like an increase in profits and same-store sales. While the industry is suffering, no new competitors will be entering the market, so both Home Depot and Lowe's are well positioned for this. If a recession or anything resembling such a thing does emerge pushing back new home sales, Home Depot will see growth in the remodeling business. Lastly, all the complaints shareholders and consumers have leveled at the company may seem like they have fallen on deaf ears, but I suspect they have not, and current management will have any easier time showing gains over such low expectations.
Wal-Mart (NYSE: WMT) is the biggest of "Big Boxes" and has suffered mightily for it. It has been making gains overseas, but in the United States it is facing many continuing challenges. Its size hurts it in several respects. When it searches for a site there are fewer choices and often residents do not want to see such massive change to their communities. It offers jobs, but they are low-paying jobs with few benefits, and it is not union friendly either.
When it wants to expand same-store sales, Wal-Mart cannot rely on simply adjusting the product mix or adding a few things, so it has had to enter entirely new businesses, which it has done like the food business and the drug business. It wanted to enter the banking business as well, but this idea has been met with tremendous opposition.
Worst of all for shareholders, in particular long-term shareholders, its stock price is down about 20% over the past five years, and this is very disappointing considering that the market is up substantially. Wal-Mart reported strong sales recently and increased profits, but you wouldn't know it by looking at Wall Street's response.
In my view, one of the critical issues for Wal-Mart to contend with is that growth will be difficult, and unlike other large companies that have the option of spin-offs or break-ups or outright sales of assets, what can they do to become more agile or attain better value for its assets?
It is true that all of these companies have felt the heat at times from investors, the media, local municipalities, and their citizenry. However, they are also victims of their own success, or at least past success. This certainly contributed to hatred of Microsoft Inc. (NASDAQ: MSFT), before and the building animosity against Google Inc. (NASDAQ: GOOG) now. The idea of hating a company is too harsh and seems out of place in general. However, if you have suffered the consequences of negative personal experience I suppose you might develop such feelings. What companies are on your short list of infamy?
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He does not own any of these securities.
Share the reasons for your pick of the most hated company in the comments, or let us know about any contenders we overlooked. Also be sure to see the rest of AOL Money & Finance's Best & Worst of 2007.