The Bigger They Come, The Harder They Fall

My name is Ozymandias, King of Kings:
Look on my works, ye mighty, and despair!
-- From "Ozymandias" by Percy Bysshe Shelley, 1818

You don't have to be a Watchmen fan (or an English Romantic) to know that just because a company was great yesterday doesn't mean that it'll be around tomorrow.

Take Montgomery Ward, for example. In the 1940s and '50s, it was one of the biggest names in retail. The company's last store closed in 2001; Target (NYSE:TGT) and other big-box megamarts had made Ward's obsolete. Similarly, Circuit City and CompUSA used to challenge each other, and Best Buy (NYSE:BBY), for the hearts and cash of American electronics consumers -- who's standing now? Those sordid stories of self-destruction remain fresh in our memories. And hey, does anyone remember Fortune's 22nd-finest employer in America, anno 2001? The Enron name just doesn't have that gilded ring to it anymore.

I'm not trying to scare you, dear Fool. This is simply a little reminder that nothing lasts forever, and that even true-blue buy-and-hold investors may need to sell stocks every now and then. Or, looked at another way, not every dirt cheap blue chip is an automatic dream stock.

Let's look at a bunch of concrete examples, using a pretty Foolish way of finding undervalued stocks that may be poised to rebound in a big way. The BMW method has nothing to do with German luxury cars, but it provides some of the most spring-loaded stocks you'll find today, given a 30-year perspective on the market:

The "return factor" is how many times over the stock would have to multiply in value in order to return to its own historical stock-price growth rates. In this case, it'd take a triple to get the House of Mouse back to the 8.8% average annual growth the company saw over the last 30 years.

All of these companies are huge household names, and their histories are nearly synonymous with the very concept of American business. But that may not be good enough to save their bacon. Citigroup may soon become an arm of the U.S. government. How many Fords have you driven lately -- let alone bought?

Our CAPS community can help you put these presumed bounce-back gains into perspective, as 125,000+ Foolish members help each other figure out the stock market every day. Disney and Alcoa might do all right from that perspective. American Express is on the fence.

Do you think CAPS gets any of these calls blatantly backwards? Drop by and fill us in on your thought process. It's fun, 100% free, and only mildly addictive. And CAPS can help you avoid the desolate fate of Ozymandias -- small-f fool of fools.

More grim Foolishness:

• Will These Large Caps Go Bankrupt?
• The CAPS Screen: 5 Financial Powerhouses
• When Companies Go Bankrupt