Blindsided

Sometimes, despite following an investment approach that your comfortable with, one of your holdings gets blindsided.  A case in point was BPT taking a huge hit in January merely because someone wrote an article questioning the value of BPT's oil reserves.  Happily, since then BPT has been on the mend.

       














On Sunday I added Sprint (S) to the Change of Heart portfolio we're using to test a market neutral strategy.  Surprise, surprise, on Monday AT&T announced plans to buy T Mobile apparently leaving my new best friend Sprint out in the cold.  Here's a record of the damage; luckily there's no real money tied up in Sprint.

 














Up until the weekend Adobe (ADBE) was also a Change of Heart holding.  Today Adobe cut it's outlook because of issues related to the tsunami.

Three bolts of lightning-- an Internet post, a takeover, and a natural disaster-- had, or could have had, an immediate negative effect on the bottom line.  Can you prepare for these unforeseen events?  Would the use of stops help much?  Predicting bolts of lightning is impossible by definition, though whenever I read "the dividend is safe", alarm bells go off.  The old adage of steering clear of things too good to be true has merit.  But I've accepted that being occasionally blindsided is just part of investing and diversification is the retail investor's only defense.  Once the damage is done, reassess and move on.  Unless of course you can find someone to sue.