The diversified company, long out of fashion and derided by commentators for lack of focus and lack of value, may in fact be the best business model for tough economic times, according to a new report by The Boston Consulting Group (BCG) and HHL – Leipzig Graduate School of Management.

Diversified companies actually perform as well as focused companies and also have a measurable financial advantage, according to the report.

More critically, top diversified companies turn this financial edge into a competitive advantage that enables them to outperform their peers and recover rapidly from crises. These findings are based on an analysis of more than 1,100 diversified and focused companies conducted jointly by BCG and HHL – Leipzig Graduate School of Management.

“Diversification is a compelling strategy—it represents the time-tested idea that it’s best not to put all your eggs in one basket,” said Dieter Heuskel, a Düsseldorf-based senior partner at BCG and a coauthor of the report.

“But in recent years, conventional wisdom has held that focus produces superior financial and operational performance, and the markets have agreed, penalizing diversified companies with the conglomerate discount. Our analysis shows that the discount has declined, and in many cases, it is unwarranted. The best diversified companies perform better for investors and operationally, and their business model is demonstrably more resilient in hard times.”

The report says that during the financial downturn, diversified companies had significantly less volatile—or less risky—total shareholder returns (TSRs) than their focused counterparts.

This risk advantage was reflected in solid global credit ratings and narrower credit-default-swap spreads. These factors enabled diversified companies to get easier and cheaper access to capital, particularly at the height of the crisis.

According to the report, the financial crisis magnified the differences between strong and weak diversified companies.

The performance gap between companies that outperformed in the crisis and those that underperformed widened from 16 percent in the period from January 2006 through December 2007, to 52 percent by the end of 2009.

The gap continued to grow to 73 percent as the recovery got under way in 2010.