What is 'Big Uglies'

Big uglies were known as old industrial companies in gritty industries, such as mining, steel and oil, that have tended to be unpopular stocks with investors.

BREAKING DOWN 'Big Uglies'

Big uglies are often affordably priced and can be difficult to sell. The traditional picture of big uglies as being exclusively industrial in nature has changed over time. The definition has broadened to now include any established or out-of-favor companies within many different sectors. For instance, in the technology sector, as cloud computing and tablets have come into vogue, more staid technologies like routing vendors have earned the big ugly label. Or within the financial sector, some large banks that have been around for a long time and have a large footprint in multiple countries have been referred to as big uglies. Other sectors that contain big uglies include utilities, healthcare, biotechnology, and consumer goods. Regardless of the state of the market, consumers are still going to purchase food, health products, and basic home supplies. Therefore, established companies operating in these sectors will typically retain their values during times of uncertainty, as investors increase their demand for these shares.

Advantages of ‘Big Uglies’

Despite the negative connotation of the term, big uglies offer some attractive qualities for investors. They typically provide solid long-term earnings, growth and dividends, have strong balance sheets, and can have recognizable brands. They are often overlooked by investors seeking fast profits, but not by value investors looking for bargain-priced stocks with a low price-to-earnings ratio. On the other hand, when markets tumble, the bulletproof earnings of the big uglies attract investors of all types. While most assets are falling in value, big uglies either retain or increase in value.

They also tend to be relatively low-risk, which further enhances their status as a safe haven during times of market volatility. Big uglies also tend to be multinational corporations, which provides further diversification and insulation against individual sovereign economic problems which companies that are more growth-oriented or rely on smaller market niches may not be able to offer. As with any other investment, however, Investors should carry out due diligence when looking to invest in big uglies, as an asset that is considered a safe choice in a downturn may not necessarily be a good investment when the stock markets are rising.
 

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