“We can say without reservation that, in investing, spinoffs are the closest thing you can find to a sure thing. It all comes down to the incentives when companies spin off a subsidiary or division and hand out shares to their shareholders. Study after study has shown that after an initial adjustment period of a few months, spinoffs tend to outperform groups of comparable stocks for several years….” Pat McKeough shows how spinoffs and other “special situations” can create windfalls for informed investors.
Two Canadian retail chains, Mountain Equipment Co-op and Running Room, will stop selling the products of this outdoors firm due to its involvement in the manufacture of assault weapons such as the one used in the recent Florida high school shootings.
The Utah-based firm, the product of a 2015 spinoff, is reviewing a number of its brands for a possible sale of assets and has already decided to sell at least three of them over the next few quarters. Thus far, those brands do not include its weapons subsidiaries.
“The closest thing to a sure thing in investing”
Here’s how investors like you can uncover the explosive power of hidden value. When a company creates a spinoff from a subsidiary, both spinoff and parent can outperform comparable stocks for years. That’s why we believe spinoffs are “the closest thing you can find to a sure thing in investing.” Now we have created an advisory like no other, created for investors who find excitement following the inside track on lucrative corporate strategies—Spinoffs, Takeovers & Special Situations. To find out more, click below.
VISTA OUTDOOR INC., (symbol VSTO on New York; www.vistaoutdoor.com), is a manufacturer of consumer products for the outdoor sports and recreation markets. Its brands include Federal Premium ammunition, Savage rifles, Bushnell binoculars and riflescopes, and Bell and Giro cycling helmets.
Vista Outdoor was spun off from the sporting group of Alliant Techsystems Inc. (formerly New York symbol ATK) in February 2015.
Shareholders of Alliant Techsystems received two VSTO shares for every share of ATK they held. Alliant’s aerospace and defense groups were then merged into Orbital Sciences Corporation; the merged entity was renamed Orbital ATK Inc. It now trades under New York symbol OA.
Since the middle of 2016, Vista Outdoor’s stock has dropped from $50 to around $16 a share today.
In the fiscal third quarter ended December 31, 2017, revenue fell 11.0%, to $581.0 million from $653.5 million a year earlier. Sales declined for both the company’s outdoor products and its shooting sports segment as a result of lower demand and a challenging retail environment. That includes retail chain bankruptcies and retail chain mergers. The company also incurred costs related to reorganization and costs associated with possible transactions.
Disregarding one-time items, the company made $0.94 a share in the latest quarter as opposed to a loss of $0.64 a share a year earlier.
Growth stocks: Company already prepared to sell some brands
The company is in the process of completing a review of its brands, and plans to sell assets where it sees the potential to unlock shareholder value. As part of that review, it has already announced its intention to sell the Bollé, Serengeti and Cébé brands.
These brands were acquired as part of the Bushnell acquisition in 2013 and focus primarily on fashion, prescription and safety eyewear. Those are areas that Vista has now determined are outside of its core business. It expects to complete those sales over the next few quarters.
Whether Vista will be successful in turning around its sales and profits in a hugely competitive industry is far from certain. At the same time, its long-term debt of $905 million is a high 90% of its $912.0 million market cap. That adds a lot of risk.
TSI Network recommendation: We don’t recommend shares of Vista Outdoor.
This article has been updated from the November issue of our special advisory, Spinoffs, Takeovers & Special Situations
I do not invest in alcohol, weapons, cigarette or cannabis securities. However, Canadians are too quick to react, i.e. stop selling products of companies who sell guns. That is just plain stupid. Throwing out the baby with the bath wash is what it is. I do not own any guns btw.
Thisarticle starts off badly — Look at the picture — It is obviously a left handed shooter — a rarity as most people are right handed and even some left handed people have a right master eye and so shoot from the right shoulder. I agree with the previous post as well but I do own firearms. The problem in the USA is that they have yet to discover that the important thing is not to regulate guns but to regulate people. Some people should never be allowed anywhere near any firearm at all !!
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REI is an American Coop retail outlet. They have no stores in Canada!
Thanks for pointing that out! We have fixed it.
I posted a comment previously on another company. To my knowledge it was never moderated and never posted!
I do not invest in alcohol, weapons, cigarette or cannabis securities. However, Canadians are too quick to react, i.e. stop selling products of companies who sell guns. That is just plain stupid. Throwing out the baby with the bath wash is what it is. I do not own any guns btw.
The lead in to this article….I don’t believe REI is a Canadian based retailer is it? As far as I’m aware they are a US retailer.
Thanks for pointing that out! We have fixed it.
Thisarticle starts off badly — Look at the picture — It is obviously a left handed shooter — a rarity as most people are right handed and even some left handed people have a right master eye and so shoot from the right shoulder. I agree with the previous post as well but I do own firearms. The problem in the USA is that they have yet to discover that the important thing is not to regulate guns but to regulate people. Some people should never be allowed anywhere near any firearm at all !!