This McKinsey article reflects something taught in my finance classes; it’s nice to know that my bachelor’s degree didn’t go to waste!
Diversification within a company, I was taught, is not the way to go about helping shareholders. It is difficult, if not impossible, for a single company to deliver value in several different industries at the same time. Companies tend to have one core competency, maybe two.
Diversifying is something that investors can take care of themselves, with much less risk. Diversification in a company through purchases of other, dissimilar, companies does nothing but increase the downside risk and limit the upside benefits, as stated in the McKinsey article.