The literature sent to shareholders explaining the spinoff is usually hastily prepared, blasé, and understated, which makes it even better than the regular annual reports. Spinoff companies are often misunderstood and get little attention from Wall Street. Investors often are sent shares in the newly created company as a bonus or a dividend for owning the parent company, and institutions, especially, tend to dismiss these shares as pocket change or found money. These are favorable omens for spinoff stocks.
This is a fertile area for amateur shareholders, especially in the recent frenzy of mergers and acquisitions. Companies that are targets of hostile takeovers frequently fight off raiders by selling or spinning off divisions that then become publicly traded issues on their own. When a company is taken over, the parts are often sold off for cash, and they, too, become separate entities in which to invest. If you hear about a spinoff, or if you’re sent a few fractions of shares in some newly created company, begin an immediate investigation into buying more. A month or two after the spinoff is completed, you can check to see if there is heavy insider buying among the new officers and directors. This will confirm that they, too, believe in the company’s prospects.
- companies that did great after spin-off: Paypal, Ferrari, Zoetis, Abbvie, (Porsche, Chipotle), MSCI (from MS in 2007)
none of these is an investment device #investing #valueinvesting 【Playlist】: [ Ссылка ]
