Peter Lynch is well known for the investing maxim “invest in what you know.” Obviously, it worked extremely well for him and hopefully for all the investors who read his books. There are a bunch of great stories of watching what hot trends your kids are getting into and following that through to a purchase of the related stocks. Or investing in the industries related to your profession, etc. etc. Unfortunately, the “invest in what you know” concept is unidirectional. So here is my new investing principle - “Uninvest in what you know.”

Lately, I have been experiencing a few issues around my house that involved unbelievably bad customer service. I only wish I had them recorded so I could play the audio / video and give the AOL and Comcast examples a run for their money. Once I calmed down, I thought about Peter Lynch and Barry Ritholtz of The Big Picture blogging fame. If you have never read Barry’s stuff or seen his appearances on financial tv, you are missing out(that was one of the only recommendations you’ll see from me.) Anyway, in March, Barry wrote a piece about a terrible experience with Dell’s customer service. Dell’s problems have been well publicized in the following 4 months and the stock has declined about 25% since his post. I should have listened to Barry and changed my signal immediately. Instead, the HedgeFolios signal is off 27%.

So when I ran into my recent problems with Echostar (DISH) and a subsidiary of Tyco (TYC), I came up with this new investing- or should I say “uninvesting” principle. Consider uninvesting by shorting or selling stocks of companies that are not living up to your expectations. You should still think about all the other implications (tax, diversification, etc.) and talk with your financial advisor, but there are times when all the fundamental and technical analysis should take a backseat to common sense.