A parent company is a company that holds sufficient voting stock to have control over another corporation. This can occur through the creation of a now publicly traded subsidiary or through the purchase of stock in another company.
Parent companies are also formed via corporate spin offs. The parent company typically starts by selling a portion of the new company to the public, to establish a market and a following among investors. That way, by the time of the spin-off, stock in the new company is liquid enough to be sold relatively easily, and held with some confidence as a worthwhile investment.
In our experience, and in most academic studies of the subject, this helps the parent and the spin-off. Both generally do better than comparable companies for at least several years after the spin-off takes place. We would never invest purely because of a spin-off, of course, because there is no guarantee of this “spin-off bonus”. However, it’s certainly a plus.
Parent companies and spinoffs are just one example of the stocks we look to recommend for investors. Overall, though, for a sound long term investing strategy we recommend using our three-part Successful Investor philosophy:
Discover how most investors who successfully build wealth over the long term follow certain investing practices. Find out what they are in our FREE investing guide, The 10 Best Practices of Successful Investors.
STARBUCKS CORP., $85.27, Nasdaq symbol SBUX, is still a buy.
The company is a leading seller and roaster of specialty coffee. It has 32,180 outlets in roughly 80 countries. Licensees operate about half of those stores.
To boost its sales in Asia, Starbucks plans to launch new… Read More
With share splits, a company is simply cutting itself up into a number of pieces, without changing its fundamental value. It wants its stock to trade in a price-per-share range that seems reasonable to investors. This can affect stock market trading in more ways than… Read More
A spinoff investment will likely be undervalued and it’s almost always a better option than new issues or IPOs
A spinoff investment is created when a company sets up one of its subsidiaries or divisions as a separate company, then hands out shares in the new… Read More
Stock spinoff investing is about as close as you can get to a sure thing when looking for stocks to add to your portfolio
Over the years, we’ve found that spinoffs are about as close as you can get to a sure thing in investing. Statistics… Read More
Lower power generation was largely responsible for this renewable energy generator’s 13.6% drop in revenue during the most recent quarter.
However, selling wind power under long-term guaranteed contracts to clients including its parent company makes this firm’s high dividend relatively safe.
TRANSALTA RENEWABLES, (Toronto symbol RNW; www.transaltarenewables.com),… Read More
Canada’s biggest real estate investment was formed when Canadian REIT completes its merger with Loblaw’s Choice Properties REIT.
The new REIT has 726 properties with a total of 65.5 million square feet in retail, industrial and office space. From the time Canadian REIT was first… Read More
Savvy investors who track upcoming spinoffs position themselves to tap some of the market’s best performers
As a general rule, for any upcoming spinoffs we like, it’s better to buy more of any shares you receive, rather than selling them. In fact, a number of studies… Read More
CANADIAN PACIFIC RAILWAY LTD., $367.70, Toronto symbol CP, is still our #1 Conservative Buy for 2020.
Through their shares, investors tap a company shipping freight over its 22,000-kilometre rail network between Montreal and Vancouver. It also links to hubs in the U.S. Midwest and Northeast.
The COVID-19… Read More
Despite the negative impact of COVID-19, these two spinoff firms demonstrate our belief that spinoffs are the closest you can get to a sure thing in investing. Even after their impressive gains, we feel both Fortive and Yum China are in a strong position to… Read More
CISCO SYSTEMS INC., $47.83, Nasdaq symbol CSCO, is a buy.
Through their shares, investors tap a global producer of hardware and software that links and manages computer networks.
The company is now buying San Francisco-based ThousandEyes Inc., a private software maker whose products help businesses monitor their… Read More
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