WITH THOUSANDS AND THOUSANDS

of publicly traded securities to choose from, what's the trigger that prompts investors to put money to work? For some, it's a technical signal or new product innovation. For others, it might be a newsletter recommendation or an analyst tout on TV.

But for all the reasons to make an investment, the worst and I mean the most sincerely blockheaded reason is because XYZ is a big company that's "not going out of business anytime soon." I hear this rationale all the time from both new and experienced investors alike. From my perspective, this has to be one of the most foolish reasons I can think of to put money to work.

Why? Well, to borrow a phrase from Gen. Douglas MacArthur: Old stocks never die; they just fade away. There are plenty of examples of companies that persevered or even prospered as their stocks withered. It's a phenomenon that occurs thanks to an important distinction many investors tend to forget a company and a stock are two different entities altogether.

When you buy a stock, you're buying a valuation. Even if a dividend is paid, you're essentially betting on the greater fool theory, hoping that at some point over the "long haul" someone else will come along and buy the shares at a higher price. Because stocks tend to anticipate news rather than reflect it, the truth is that shares of XYZ are often at their hottest long before the good news breaks. So while we'd like to think that a successful enterprise equates to an ascending stock price, history often suggest otherwise.

One classic example is Xerox, which back in the early 1970s was a leading growth company with cutting-edge technology. Far from going out of business, the firm has achieved remarkable success; "to Xerox" has become synonymous with photocopying itself. Yet today the stock trades around $13.50, not far off from where it sat when Richard Nixon was in office. Shares hovered near $10 for most of the period between 1975 and 1991. Is that long term enough for you?

Treading Water

It's a similar story for IBM, a stock that generations have counted on as one of the bluest of blue chips. Even as an influential member of the Dow Jones Industrial Average, the stock has essentially flat-lined for more than 20 years. Although there was plenty of volatility along the way, IBM started both 1972 and 1993 right near $15 a share (adjusted for splits).

IBM's Blue Period

More recently, take a look at hugely successful Internet companies like Yahoo or Amazon. While both are undoubtedly more profitable than they were in the late 1990s, their stocks remain well below those now seemingly untouchable highs. Once again, we see how a company's success doesn't ensure, or even necessarily support, a higher stock price over time.

In today's market, I foresee widely owned names like Microsoft, Pfizer and Intel as being among the "old soldiers" that, 15 years from now, could very likely trade not far from current levels. So even though these are companies investors feel comfortable owning because of their industry dominance, the notion that survival will necessarily translate into a buoyant stock price is questionable. They might not die, but they could simply fade away.

Take Microsoft, for example, which has created scores of successful and widely accepted products. Yet its stock is trading not far off from where it was in 1998. Same story at Pfizer, which also trades at late 1997 levels. Intel, whose microprocessors have achieved a near monopoly world-wide, has been dead money now for almost eight years. Great companies. Dominant products. But rather soggy stocks.

Many investors right now are eyeing beaten-down blue chips like JP Morgan Chase, International Paper and General Motors, making the bullish argument that the companies' dominance makes them smart buys. But for those interested in owning a piece of a company simply based on its staying power, I happen to think purchasing their exchange-traded bonds or preferred stocks is a much smarter bet. Because bonds hold a much higher rank in a firm's capital structure than stocks, a company's lenders are in a comparatively better position to benefit from their longevity.

So if you're intent on bottom fishing in General Motors, instead of buying some of the 564 million outstanding common shares, opt to pick up a position in General Motors 7.50% Senior Notes due in 2052. These long-term unsecured notes pay quarterly interest and currently yield over 9.20%. If you're betting on GM's survival, I believe this is a more savvy route to take than simply buying the stock.

Or if you're inclined to bet on the airline sector, a position in Northwest Airlines 9.50% Senior Quarterly Interest Bonds due in 2039 is a much smarter play than putting money into Northwest Airlines stock. The highly volatile securities currently yield over 13%, a payout that will certainly narrow if the company can return to financial health.

In my fund I maintain a long-held position in ING Groep 6.20% ING Perpetual Debt Securities, the unsecured debt of one of Europe's largest banks. The security trades off both interest rates and perceived credit quality, and at current levels is yielding 6.20%. While I don't believe the banking sector's common stocks are showing great strength, I am comfortable in owning a debt security of a stable firm that I believe to be a survivor.

Considering my fondness for utilities, I've also picked up Consolidated Edison Co. of New York 7.50% Public Income Notes and Georgia Power 5.75% Series T Senior Public Income Notes. Both offer generous yields, quarterly payouts and the wager that two major utilities will be able to pay their bills.

Want to sniff out your own bond shopping list? Quantumonline.com provides what I've found to be the Web's most comprehensive and detailed directory of exchange-traded debt. This handy resource, available at no charge, offers a wealth of information on income securities of every kind.

Jonathan Hoenig is managing member at Capitalistpig Hedge Fund LLC. At the time of writing, Hoenig's fund held positions in many of the securities mentioned.