Odds favor Wendy’s & Tim

Article Excerpt

Here are two general rules that have paid off again and again over the years: First, new stock issues tend to produce below-average results for investors; second, spin-offs tend to produce above-average results. This is due to human nature. New issues come to market when it’s a good time for the company or its insiders to sell. That’s not likely to be a good time for you to buy, regardless of any mitigating factors. The reverse is true of spin-offs (when a company sets up a division as a separate entity and hands out stock in it to its own investors). Companies create spin-offs when they are likely to pay off for their own investors. Of course, some spin-offs drop when they first hit the market. Some investors don’t want to add a new stock to their portfolios, especially if they only receive a small holding. Meanwhile, brokers are slow to add spin-offs to their research coverage. Wendy’s, one of our long-time favorites, recently…

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