Investment results, like much that happens in our lives, are the product of our choices. Why do some people choose to live in a bad neighborhood and then act surprised when their car is vandalized or their home is robbed? Why do people buy stock in bad companies? Who knows what compels people to make bad choices? But that's why your great stock pick doesn't always do what you think it should be doing. Nobody said markets, or people, are rational.
Symbol Technologies
But, I haven't seen any evidence to suggest that companies with significant problems tend to improve significantly after getting caught. Typically, the problems they are caught for are the tip of the iceberg and there are other problems underlying and deeply ingrained that permeate throughout the company. The leaders simply make bad choices and aren't likely to suddenly clean up their act and start making great decisions.
Look at Electronic Data Systems
Who knows what problems are embedded into Symbol. I could be wrong, but there's no way to be sure, and given the choice between investing in a company with a clean record and equal growth potential and a firm like Symbol with its ongoing investigations, I won't apologize for taking the former of the two choices every time.
Another Fool recently came to the opposite conclusion about companies cleaning up their act, and cites a couple cases where that may be true. It's a subject worthy of more in-depth analysis.
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Fool contributor Mark Mahorney doesn't own shares of any companies mentioned.