spin off

HEWLETT-PACKARD ENTERPRISE CO., $18.25, New York symbol HPE, sells computing services and products, such as servers and analytics software, to businesses and governments. The stock jumped over 15% this week after the company announced that it would spin off its Enterprise Services business and merge it with Computer Sciences Corp. (New York symbol CSC). The Enterprise Services operations, which supply 36% of HP Enterprise’s total revenue, help corporate clients manage their data centres and computer networks....

When a company carries out a spinoff, it sets up one of its subsidiaries as a separate firm, then hands out shares in the new company to its own shareholders. I can still say without reservation that spinoffs are the closest thing you can find to a sure thing in the world of investing. Study after study has shown that after an initial adjustment period of months—not years—spinoffs tend to outperform groups of comparable stocks. (For that matter, the parent companies also tend to outperform comparable firms for several years afterwards.) There are a couple of reasons for that. First, company managers naturally prefer to acquire or expand their assets, not get rid of them. Getting rid of businesses reduces a company’s total potential profit. The management of a parent company will only hand out a subsidiary to its own investors if it’s nearly certain that the subsidiary, and the parent, will be better off after the spinoff....

From the time the last spike was driven to complete the new railway in 1885, Canadian



Pacific has been an essential part of Canada’s history, transportation and business life....

CONAGRA FOODS INC. $45 (New York symbol CAG; Income Portfolio, Consumer sector; Shares outstanding: 436.4 million; Market cap: $19.6 billion; Price-to-sales ratio: 1.2; Dividend yield: 2.2%; TSINetwork Rating: Above Average; www.conagra foods.com) makes packaged foods, including Chef Boyardee canned pasta, Hunt’s tomato sauce, Peter Pan peanut butter, Orville Redenbacher popcorn and Reddi-wip whipped cream. The company recently sold its private-label foods business to TreeHouse Foods (New York symbol THS) for $2.6 billion. Excluding these operations, ConAgra sales for its fiscal 2016 third quarter, which ended February 28, 2016, rose 0.6%, to $2.92 billion from $2.91 billion a year earlier. Earnings fell 11.6%, to $187.6 million from $212.3 million. Due to more shares outstanding, earnings per share fell 16.3%, to $0.41 from $0.49....

Increasingly health-conscious consumers are switching away from processed foods. In response, these top food producers are developing healthier products. But they are also restructuring to cut their costs. That should continue to expand their earnings. KRAFT HEINZ CO. $79 (Nasdaq symbol KHC; Conservative Growth and Income Portfolio, Consumer sector; Shares outstanding: 1.2 billion; Market cap: $94.8 billion; Price-to-sales ratio: 5.2; Dividend yield: 2.9%; TSINetwork Rating: Above Average; www.kraftheinzcompany.com) makes condiments and sauces (such as Heinz Ketchup) as well as other packaged foods. These include Velveeta and Philadelphia Cream Cheese, processed meats (such as Oscar Meyer hot dogs) and beverages (such as Maxwell House coffee). Kraft Heinz took its current form on July 2, 2015, through the merger of Kraft Foods Group and H.J. Heinz. The combined firm is the fifth-largest food and beverage producer globally....

BOMBARDIER INC. (Toronto symbols BBD.A $1.52 and BBD.B $1.43; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.7 billion; Market cap: $2.3 billion; Priceto- sales ratio: 0.2; Dividend suspended in February 2015; TSINetwork Rating: Speculative; www.bombardier.com) is the world’s third-largest maker of commercial aircraft, after Boeing and Airbus. It’s also a leading maker of passenger railcars. The company recently formed a joint venture with the government of Quebec to build its new CSeries passenger jets. Under the deal, the province will pay $1.0 billion for 49.5% of this business (all amounts except share prices and market cap in U.S. dollars)....

Bombardier and BlackBerry (see box) continue to struggle with strong competition and shrinking sales. However, both are developing new products that should spur growth. As well, their sizable cash holdings help cut their short-term risk. BOMBARDIER INC. (Toronto symbols BBD.A $1.52 and BBD.B $1.43; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.7 billion; Market cap: $2.3 billion; Priceto- sales ratio: 0.2; Dividend suspended in February 2015; TSINetwork Rating: Speculative; www.bombardier.com) is the world’s third-largest maker of commercial aircraft, after Boeing and Airbus. It’s also a leading maker of passenger railcars. The company recently formed a joint venture with the government of Quebec to build its new CSeries passenger jets....

PFIZER INC., $32.50, New York symbol PFE, is the world’s largest pharmaceutical company. It has cancelled its merger with Irish drugmaker Allergan plc (New York symbol AGN), which is best known for the anti-wrinkle drug Botox. The deal was meant to cut the combined firm’s corporate tax rate to 18% from 25%. New U.S. tax rules now prevent that savings. Under the terms of the agreement, Pfizer must pay Allergan a $150-million break-up fee. To put that in context, Pfizer earned $3.3 billion, or $0.53 a share, in the three months ended December 31, 2015. The company will now speed up plans to divide its operations into two separate companies: one would focus on patent-protected drugs. The other would own established products without patent protection. Pfizer will make a final decision by the end of 2016....

ALCOA INC. $9.85 (www.alcoa.com) has suffered lately as slowing industrial activity in China continues to dampen aluminum prices. In response, Alcoa is closing unprofitable smelters. Even so, declining cash flow could hurt its ability to service its debt of $9.1 billion....

ALCOA INC. $9.85 (www.alcoa.com) has suffered lately as slowing industrial activity in China continues to dampen aluminum prices. In response, Alcoa is closing unprofitable smelters. Even so, declining cash flow could hurt its ability to service its debt of $9.1 billion....