Jan. 13, 2023

LTV, The Decline And Fall Of A Market Leader

We are at the point in the Business Cycle when we can expect some marginal businesses to fail. You've undoubtedly already seen this in your hometown, the local shop that closed, the specialty store that suddenly shut its doors for good. When financial conditions change, what was once a highly profitable business, can no longer afford to continue. It's the way that a free economy operates.

Economists have identified this phenomenon as "Creative Destruction," the transition from the unprofitable to the new and profitable. Only some of the old businesses fail, but enough do so that a formerly thriving industry becomes just a niche business for a few. Out with the desktop computers, in with the I iPhones.

What can be particularly stunning is how once dominant companies can also fall under the sword of Creative Destruction.

The first time I saw the full impact of Creative Destruction was with a company initially named Ling-Tempco-Vought, but when I caught up with them, they were simply the LTV Corporation. LTV was as imposing an investment as any of the big five tech companies today. As recognizable by investors as Apple Computer, Google/Alphabet, or Microsoft. As a Stock Broker, I had several clients who were LTV investors, so when LTV announced that they would hold their annual meeting in Beverly Hills, I decided to attend.

As I said, LTV was a very well-known company among investors. In the Go-Go-1960s, it was part of the "Nifty 50," considered the finest companies in America. Their stock was a one-decision investment. Buy LTV stock, and put it away. Investors assumed the company would grow and grow, and you'd never need to sell it. For LTV in the 60s, the sky was the limit.

But as I attended their annual meeting, we were ten years beyond that point. Although we didn't know it then, we were about to enter one of the worst bear markets in history.

As the Chairman of LTV strode to the podium that day to address shareholders, he was keenly aware that the company was in trouble. LTV had already felt the harsh reality of that Creative Destruction. This once high-flying stock, which had traded well into the hundreds of dollars, was now barely over two dollars.


A former test pilot, who would later become Assistant Secretary of Defense, Paul Thayer was a distinguished-looking man. He decided to move the Annual Meeting that year to Beverly Hills because of the large number of investors who resided there.

Thayer wanted to address those who had been so loyal to the company, many holding stock that had declined more than 90%, as they hoped that the future would turn things around for LTV. I particularly remember one older gentleman as he excoriated Thayer for LTV's poor performance, noting that he used to receive more in dividends than the stock was currently worth.

What had brought Mr. Thayer and the LTV Corporation to this dreadful spot? The short answer is that they over-expanded when times were good—purchasing company after company by leveraging their balance sheet. And then, when the business cycle turned, as it inevitably does, they simply didn't have the funds needed to maintain their debt.

In its heyday, LTV seemed to own everything, from aerospace manufacturing, later sold to Lockheed Martin, to pharmaceuticals, later spun off into a separate company, to meat packing companies and sporting goods.

You may be familiar with Wilson Sporting Goods and Wilson Meat Packing, home to Wilson Hams. The latter two companies were also part of the Wilson Corporation. The Wilson companies found themselves under the watchful eye of LTV. And in what has to be a record in corporate takeovers, the founder and Chairman of Wilson found out only two weeks before that LTV was taking over his company.

Such was the financial strength of LTV at its peak. LTV could call up its investment bankers and write a check, and a significant opponent came under the LTV umbrella.

But on this day, at the annual meeting in Beverly Hills, those were but bitter memories. Remembrances of things that might have been but now were barely held together.

For those of you who have lived or worked around Beverly Hills, you'll know that a substantial demographic in the city is Jewish. Unfortunately, Mr. Thayer was unaware of that simple fact. Because after enduring nearly three hours of biting questions and comments from his Beverly Hills investors, Thayer wanted to see the audience off with a parting gift. And so in the lobby, as we exited, were stacks and stacks of the premier product from LTV's signature takeover, Wilson Canned Hams.

Not one was taken!