Diworsification: The process of adding to one's portfolio in a way that worsens the risk/return tradeoff. In a corporate context: the process of poking your nose into businesses you're not good at, or less good at than what you already do.
Antonym: Concentration: Knowing what you're good at, and doing it.
See: Laser component maker and Motley Fool Hidden Gems pick II-VI
Recently, II-VI announced that it intends to sell off its X-ray sensor division, eV Products. The asking price isn't disclosed (they're just starting the search for buyers), but in the big picture, it doesn't really matter how much II-VI gets for eV. This sale is a good idea no matter what they charge for it.
Why? Because II-VI does one thing really well: It makes high-tech laser parts. Sure, until now, it also made radiation detectors -- but not nearly as well as it makes laser parts.
Last year, II-VI's compound semiconductor group -- of which eV is a part -- generated the weakest margins of any of II-VI's four business units. Its 6.2% operating margin was four times less profitable than the company's flagship Infrared optics unit.
Mr. Market initially sold off on II-VI news. I think that's a mistake. This company focuses on what it does best and tosses away the ballast of what it does less well. That's great news for Foolish shareholders.
Learn more about why we like II-VI when you take a free, 30-day trial to Motley Fool Hidden Gems.