“Private-equity funds are the conglomerates of this era.” — Jeff Immelt

One of the first stocks I ever bought was a UK-listed share called Trafalgar House. It was the early 1990s, many years before I would begin managing money professionally, and I was still learning my way around the stock market. Based on the rudimentary analysis I did, the stock looked cheap – but then it would have done: Trafalgar House was a conglomerate. And as I would later learn, conglomerates almost always look cheap.

Conglomerates became fashionable during the 1960s. Their growth stemmed from three sources. First, strict enforcement of antitrust regulations made it harder for companies to combine within industries, so managers looked outwards to satisfy expansionary ambitions. Second, lax accounting rules allowed acquisitive companies to post deceptively high growth rates, easing their access to capital markets to fund further growth. And third, business studies was emerging as an academic discipline and with …