Should You Buy Shares of a Scandal-Tainted Company?

News Corp. shares may be a bargain now, but let the dust settle on the company's phone-hacking scandal before buying them.

Can a scandal be a buying opportunity, or does it taint a stock for years? That’s the question surrounding News Corp. (symbol NWS) as it attempts to work its way out of a phone-hacking scandal that shuttered the 168-year-old News of the World, scuttled its $12 billion takeover of British Sky Broadcasting, and threatens to shred the fabric of media baron Rupert Murdoch’s empire of newspapers, cable-television operations and movies.

It’s also a question that dozens of companies have faced in the past -- from Toyota (TM) to British Petroleum (BP) -- with vastly different outcomes. In some instances, the scandal turned out to be nothing but a speed bump that created an opportunity for investors to buy a great company at a bargain price. In others, it was the harbinger of systemic problems that were just starting to surface.

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Jennifer Schonberger
Staff Writer, Kiplinger's Personal Finance