A spinoff is a new company broken off from an existing company to create more value for shareholders.
You might be familiar with Kraft Foods Group and Hewlett-Packard, two major brands who have done it with great success.
To create a spinoff, a company sets up one or more of their divisions or subsidiaries as an independent company, then hands out shares in that company to their own shareholders, as a special dividend or spinoff’.
Often, the parent company 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 may be liquid enough to be sold relatively easily, or retained with some confidence as a worthwhile investment.
As a general rule, you’d be better off to buy more of any stock you receive as a spinoff, rather than selling. In fact, many studies have shown that after an initial adjustment period of a few months, spinoffs tend to outperform groups of comparable stocks for several years.
You can contrast a corporate spin-off with a new stock issue, which is when a company first sells shares to the public.
The two situations are like two sides of a coin—one favourable to investors, the other unfavourable. The motivations of the companies are nearly the opposite.
To determine which stocks are best to invest in, use our three-part Successful Investor philosophy:
Discover how to build a winning stock market portfolio in this free special report, Canadian Stock Market Basics: How to Trade Stocks and Make Good Investments in Canada, from TSI Network
A: Pentair plc, $76.22, symbol PNR on New York (Shares outstanding: 165.3 million; Market cap: $12.7 billion; www.pentair.com), is a water-focused industrial manufacturer with three reporting segments: Flow (previously named Industrial and Flow Technologies), Water Solutions, and Pool.
The pool division is a leader in the… Read More
Use these ratios, our tips on spinoffs, and other advice for long-term gains with top undervalued Canadian stocks. Learn more now
Undervalued stocks are companies that typically have strong fundamentals and are trading, for one reason or another, at a low share price.
When you’re looking for… Read More
The term “investment synergy” entered common investor use during the takeover craze of the 1960s — but we see a new synergy that’s a big plus for investors.
The term “synergy” entered common investor use during the takeover craze of the 1960s, when businesses started to… Read More
Adding undervalued TSX stocks to your portfolio is a great way to boost your returns over time. There are some key factors you need to watch out for, though, so read on
High-quality “value stocks” are stocks that are reasonably priced, if not cheap, in relation… Read More
SPX TECHNOLOGIES INC., $110.37, symbol SPXC on New York, is a North Carolina-based supplier of HVAC (heating, ventilation and air conditioning) solutions such as cooling towers, residential and commercial boilers, and comfort heating products. The company supplies detection and measurement products such as underground locators,… Read More
Value seekers target stock spinoff investments because they recognize the potential long-term gain
Seekers of undervalued stocks are most likely to read the voluminous material that companies hand out as part of the stock spinoff process. They’re also most likely to buy a stock spinoff… Read More
You Can See Our Spinoff Stock Portfolio For February 2024 Here.
Why we like spinoffs so much
We think that spinoffs are the closest thing you can find to a sure thing for two main reasons:
1) The management of a parent company will only hand out shares… Read More
Medical products maker Edwards Lifesciences was originally a unit of Baxter International Inc. (New York symbol BAX) until that firm spun off Edwards as a separate company in March 2000.
Edwards now plans a spinoff of its own, setting up its Critical Care business, which makes… Read More
Each of these two firms recently decided to merge one of its businesses with another firm instead of pursuing a full spinoff. While these moves improve their outlook, we feel there are better opportunities for your spinoff gains.
LIONS GATE ENTERTAINMENT CORP. $10 is a hold. The… Read More
On December 1, 2023, Worthington Industries spun off its steel processing operations as Worthington Steel. Shareholders received one share of the new firm for each share they held. The former parent then changed its name to Worthington Enterprises.
The split should let both firms better focus… Read More
Learn everything you need to know in 'The Canadian Guide on How to Invest in Stocks Successfully' FREE Special Report from The Successful Investor.
How to Invest In Stocks Guide: Find 10 factors that make your investments safer and stronger.
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