TRAIN WRECKS

Rainbow

Trainwreck

Rainbow

I will tell you about some MISTAKES I have made in my investing. I call them my train wrecks. I bet you thought this was about Union Pacific's 1997-1998 problems??!!- :) If I am to have any credibility with my visitors, I must tell ALL the truth.

My portfolio has endured two "TRAINWRECKS". By that I mean, one investment messed me up because I did NOT do enough homework on the company. It's especially galling because Brown Shoe Company (ticker BWS - NYSE) is right here in St. Louis and I can go to and have been to their headquarters.
I created my position via the company's DRIP. Right after that, the company announced probs with an operation called Pagoda International, said earnings would be adversely affected, and the dividend would be cut. What is that?? Three strikes??
So, right away I'm under water on BWS But now the value investor part of me says, now just a minute. Let's just hang in and BUY MORE while it's down. BWS is not going to slip into one of the nearby rivers and sink. Guess what? Yep, that turned out to be the right move, when I finally sold it, I made a profit!!
The moral is, DON'T PANIC if you hit a speed bump on the way to financial nirvana. These sorts of things are going to happen.

Capstead Mortgage (ticker CMO - NYSE) is another one that, while I DID do my homework, this mortgage REIT's "funds from operations" was affected by the easing of long-term interest rates during 1998, and the market has correctly bashed this stock on fears of borrowers refinancing activity affecting the company's mortgage portfolio, which it did. I've been in CMO's DRIP because I believe it is a good diversification element in my overall portfolio. In May - 1999, the company restored a portion of the dividend and is hopefully well on the road to financial recovery.

In the fullness of time, the company offered a buyout of anyone who was willing. We decided to accept their offer and SOLD our shares back to the company in March - 2001.

I am fortunate in that one of the goals in developing my portfolio was to provide the safety element imposed by diversifying. There is more on this elsewhere on this site. There you have it.

Rainbow

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