Many investors felt that Altria (formerly known as Philip Morris) was as safe an investment in the stock market as possible. The company’s customers are literally addicted to its product (nicotine) and the company offered a very high dividend yield.
However, Altria is down almost 30% over the last year. What happened? While the company’s sales remain steady, the firm’s $13B investment in e-cigarette maker Juul now appears to be one of the worst deals in history. “Vaping” has been tied to a rash of illnesses and deaths in recent months, and the market is likely to shrink significantly after regulators make many of the firm’s products illegal. Altria is a perfect example of why investors need to diversify: the idiosyncratic risks of individual companies are almost impossible to identify ahead of time but can have devastating results.