We hardly ever recommend buying new issues when they are first sold to the public, and often stay away from them for months, if not years, afterward. That’s because new issues often come to market when it’s a good time for the company and/or its insiders to sell, but that’s not necessarily a good time for you to buy.

Spinoffs are in many ways the opposite of new issues. Companies often do spinoffs when they feel it isn’t a good time to sell. Instead, they choose to hand out shares of the new firm to their shareholders. That often results in buying opportunities.

(In a just-published issue of Wall Street Stock Forecaster, our newsletter for investing in the U.S. markets, we update our buy/sell/hold advice on a spinoff whose shares have risen over 21% since September. See below for further details on this tech stock’s outlook.)

How spinoffs can reward patient investors

When a spinoff begins trading, it stands to reason that investors will put a low price on it. After all, the spinoff hits the market with a large number of neutral, if not reluctant, stockholders who have limited expectations for it, and who are willing to sell when they get around to it. Moreover, there is often little, if any, brokerage research available on the new company.

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The only investors who might be willing to buy a new spinoff are those who have taken the trouble to read the voluminous material that companies hand out as part of the spinoff process. But on the whole, it pays to follow the lead of these value seekers, and to hang on through months of sluggish trading while reluctant spinoff holders exercise their urge to sell.

Tech stocks: Teradata followed the typical spinoff pattern

In the current issue of Wall Street Stock Forecaster, we update our buy/sell/hold advice on a company that followed the typical spinoff pattern, computer hardware and software maker Teradata Corp. (symbol TDC on New York).

The tech stock’s computers and software capture and store large amounts of a business’s data, including its sales and inventory. Teradata then analyzes this information and identifies buying habits and trends.

The company was a wholly owned subsidiary of NCR Corp. until October 1, 2007. That’s when NCR handed out Teradata’s shares to its own shareholders as a special dividend.

Like most spinoffs, Teradata stagnated initially. It didn’t benefit from the profile-building efforts that typically go into new issues. In addition, many NCR shareholders had little interest in Teradata, since they got the tech stock’s shares as a dividend, rather than as an investment they chose.

Trend toward more targeted marketing has helped this tech stock’s progress

More advertisers have been targeting audiences that are more specific than those offered by traditional media, like newspapers and TV. That helps data specialists like Teradata. However, the weak economy has prompted many companies to cut their marketing spending. Moreover, Teradata faces strong competition from larger tech stocks, like Oracle and IBM.

As we mentioned, Teradata has risen over 21% since September. In the latest Wall Street Stock Forecaster, we take a close look at the company’s industry position and its fundamentals, including its latest sales figures and price-to-earnings ratio, to see if the shares can go even higher.

You can get our full analysis, including our clear buy/sell/hold advice on Teradata and 20 other stocks in the fast-moving U.S. market in the latest Wall Street Stock Forecaster. What’s more, you can get this issue absolutely free when you subscribe today. Click here to learn how.