Spin-offs are a plus, not a guarantee

Article Excerpt

When a company sets up one of its subsidiaries or divisions as a separate company and hands the stock out to its investors as a special dividend, it tends to unlock hidden value. Over time, the combined value of the post-spinoff parent and spun-off company usually exceeds the value of the parent before the spin-off. Mind you, this is a general tendency, not a guarantee of continued profit. Nor does it provide protection against the effects of a bad market. During the Internet boom of a few years ago, for instance, many tech stocks spun off their Internet divisions. When that boom turned to bust, these Internet spin-offs plunged with the rest of the sector. Here is our updated analysis of spin-offs carried out by stocks we recommended. All three paid off and helped unlock some of the hidden value in the parent company. But not all of them are buys. MOTOROLA INC. $22 (New York symbol MOT; WSSF Rating: Above average) is…

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