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Giant Companies Are On Sale, But Be Picky

International Business Machines (NYSE:IBM) is remaking its business. Wal-Mart Stores (NYSE:WMT) is trying to shift gears to woo back shoppers. Nucor Corp (NYSE:NUE) and Caterpillar (NYSE:CAT) are struggling under the weight of low commodity prices. The market's darlings are heading higher, but some old stalwarts are lagging behind. There's opportunity here, but also risk.

Good companies do die

I recently wrote an article discussing Wal-Mart's attempts to upgrade its stores, improve employee relations, and compete more effectively online. The big takeaway was that Wal-Mart is trying to do a lot at one time and that what it's looking to achieve is outside the box for a company that's built its business on being cheap. It isn't that Wal-Mart can't make the shift, only that there's a risk that management won't be able to achieve what it wants.

Wal-Mart has a lot of supporters, as it should. It's been a great company for a very long time. However, for a comparison point, Sears was also a great company at one point. I can remember waiting eagerly for the Sears Christmas Catalog every year to start picking out the gifts I wanted. Through the rest of the year, it was the go-to source for just about any retail product my family wanted to look at.

How influential was Sears (NASDAQ:SHLD)? Take a quick look at the game Twister, which was just "elected" to the toy hall of fame (yes, believe it or not, they have a hall of fame for toys). Milton Bradley Co., the game's maker, stopped production of the game after Sears, "...deemed it too racy for its 1966 catalogue." Essentially, if it wasn't going to make it into the Sears catalog it wasn't worth making. Luckily for Twister fans a spot on The Tonight Show featuring Johnny Carson and Eva Gabor playing Twister boosted customer awareness of the game and saved it from the dustbin of history.

While that's one slightly amusing example, the history of Sears is tightly entwined with the growth of this country. It was a retailing giant that quite literally helped build this nation one home at a time. But if you walked into a Sears today you probably wouldn't believe it. And with good reason, it is a shadow of its former self and pairing up with Kmart has only proven that two struggling retailers merging is more likely to produce one struggling retailer than a turnaround.

But Sears isn't the only example. I've been rereading Philip Fisher's Common Stocks and Uncommon Profits, a classic finance book that prominently features Motorola as an example of a dominant company with a bright future. And it was, at least back when the book was penned. In 2011 the company split into Motorola Solutions (NYSE:MSI), which makes stuff likes radios and safety equipment that was essentially the old core of the company, and Motorola Mobility, which handled the sexier cell phone business that had...