Yesterday, my cellphone rang as I was driving to the ice rink to pick up my son. It was one of my Field Guide subscribers who I have talked to from time to time about their investing strategy. Earlier this year, they embarked on a strategy I said was risky for many reasons. Their goal? To buy into a market where a defense contractor would be building a new plant to assemble the new tanker for the Air Force. They were looking to provide housing for the influx of workers needed in that area to assemble the plane.

When we first talked about it, I shared with them just how risky I thought this was. I pointed out that unless and until the plant was actually built, there was no guarantee it would be built. I also pointed out that Boeing was crying foul over the contract awarded to Northrop Grumman in partnership with Airbus. My advice was to wait, failing that, buy at prices that make sense even if the plant is not built at all.

My caller friend didn’t agree with me. That’s fine. That is what makes life interesting. He proceeded to raise a substantial amount of capital and started quietly buying in his target areas. He presented this to his investors as a long term play. On the phone yesterday, he said they have closed on just under 200 parcels and have 30 more under contract and another 50 or so offers out to sellers.

After explaining all the details, his question was, “What do I do now that Boeing has won their protest against the Northrop/Airbus contract?”

With one finding from the General Accounting Office, the perceived value of his holdings has changed, and not for the better.

My advice to him was to first, calm down and not panic. It is unlikely he could dump the parcels at this point without suffering a loss. Anyway, the contract hasn’t been taken from Northrop and re-awarded to Boeing. Although, Boeing won it originally. The Air Force will be under tremendous pressure to review the new proposal from Boeing using the 777 as the airframe for the tanker. On a head-to-head comparison between the A330 and the 777, the 777 wins hands down. But, right now, it is a wait and see situation.

Furthermore, I told him he needs to immediately meet with his investors and consult with them on the situation and explore options as a group. It is only fair. He needs to formulate a plan without the stimulus to the local economy he was counting on.

Ultimately, I suspect Northrop will build a plant in that location even if they lose the tanker deal. But, it will have to wait until another contract comes along needing a new facility. That might be a while.

At the end of the call, he said, “Well, you win some and lose some that just the way this thing called investing works.”

I replied, “Nope, that is why it is called speculation.”

Readers at the Field Guide can read where I think a good “speculative” play exists. Yes, of course, by “speculative” I mean the fundamentals driving it are almost guaranteed.