The Fall of a Gianthttp://www.fool.com/investing/general/2012/06/18/the-fall-of-a-giant.aspx Prabhat Sakya, Fool U.K.
June 18, 2012
LONDON -- These days, most investors, me included, would say that high-quality blue-chip companies should make up the core of your investment portfolio. We are blessed with a market where a range of great blue-chip businesses are priced incredibly cheaply.
Throw in some impressively high yields, and it looks like you can't go wrong. We would expect a portfolio of blue-chip high-yielders to produce both dividend income and capital growth over the next decade and more.
But I would warn that it isn't always as simple as that. Giants can rise, but they can also fall. Take the example of Sony (NYSE: SNE ) .
An illustrious history
Back in the 1970s, the Japanese were seen as making cheap and inferior copies of Western products. Sony was perhaps the one brand, above all others, that transformed that reputation.
By the late 80s, Sony products were being sold all over the world. They had a reputation for being at the cutting edge of technology, and their quality was impeccable. If you wanted to buy the best quality television, hi-fi, or other electronic product, you had to choose Sony.
The Apple of its day
It's hard to imagine it now, but back in those days, Sony was producing hit after hit. It could do no wrong -- it was, quite simply, the Apple (Nasdaq: AAPL ) of its day. People marvelled at Akio Morita's vision in the same way that people talk about the vision of Steve Jobs today.
Sony's rise coincided with Japan's rise, and also with the incredible bull market in the Japanese stock market. As Japan boomed, Sony's share price went through the roof.
The first mistake
This pursuit turned out to be misguided, and it was Sony's first strategic mistake. But, nonetheless, the business continued to be successful through the 90s. By 2000, Sony was valued at $100 billion and remained one of the world's leading companies.
A turning point
In one fell swoop, Apple stole from Sony the m