Zombie Companies

[Rover110]

I remember reading some years back about the failure of Maplin - the electronic component retailer - either here on Lemon Fool or Motley Fool (uk).
A comment was made that it had been a "zombie" company for some years, but I don't remember much about why the contributor was of that opinion.

There could be other listed zombie companies with little prospect of recovery.
How might one reduce exposure to them? Or will that impact returns in other ways?

I think of myself as a largely passive investor who has a few index trackers as well as Vanguard lifestrategy.
Can my investments be tweaked to avoid zombies?

[Hariseldon58]

A zombie company will be very small and drop out of the index. Nothing to worry about, the concentration in index funds is significant, eg in a Developed world tracker , the bottom 50% of stocks by number are only worth 6% by capitalisation.

[Gerry557]

Any company can become a zombie company.

Basically they just manage to keep going often with large debts. It's when rates rise that these tend to fail having kept going for years on the edge.

They often don't have much else going to improve things.

[GeoffF100]

Zombie companies can either fade away or burst into life and become big winners from a low price base. If you can find a way of reliably telling which will happen, you will become a very rich man. If you do not have a skill that the professionals do not, buy a tracker.

[GeoffF100]

A zombie company will be very small and drop out of the index. Nothing to worry about, the concentration in index funds is significant, eg in a Developed world tracker , the bottom 50% of stocks by number are only worth 6% by capitalisation.

The smallest stocks in the FTSE All-World index are approximately as large as the smallest FTSE 100 stocks. The smallest stocks in the MSCI All-World Index are larger. Neither index has very small companies.