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.
In our experience, and in most academic studies of the subject, this helps the parent and its corporate spinoff. Both generally do better than comparable companies for at least several years after the spinoff takes place.
When a company carries out a spinoff, it sets up one of its subsidiaries or divisions as a separate company, then hands out shares in the new company to its own shareholders. It may hand out the shares as a special dividend, or give its shareholders an opportunity to swap shares of the parent company for the shares of the newly established spinoff.
Study after study has shown that after an initial adjustment period of a few months, stock spinoffs tend to outperform groups of comparable stocks for several years. (For that matter, the parent companies also tend to outperform comparable firms for several years after a spinoff.) The above-average performance of spinoffs makes sense for a couple of reasons.
First, company managers naturally prefer to acquire or expand their assets, not get rid of them. Getting rid of assets 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 than before.
Second, spinoffs involve a lot of work and legal fees. Companies only have an incentive to do spinoffs under two sets of favourable conditions: When they feel it isn’t a good time to sell (which often means it’s a good time to buy); or, when they feel the assets they plan to spin off will be worth substantially more in the future, possibly within a few years.
Quite often, a big company will spin off a small subsidiary because it feels the subsidiary is a tiny gem, but that it’s too small to make an impact on the much larger financial statements and market capitalization of the parent.
At TSI Network we’ve had great success with a number of spun off stocks over the years. That’s especially true of the many spinoffs we have recommended that have gone up after they began trading, and have later attracted a takeover bid at a substantial premium over the market price.
Needless to say, things don’t always work out this well. Spinoffs and their parents do sometimes run into unforeseeable woes. But on the whole, in investing, spinoffs are the closest thing you can find to a sure thing.
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The first of those spinoffs is Solstice (see next page), which makes chemicals for a variety of industrial products. It will begin trading in early November.
Honeywell now expects to complete the breakup of its automation and aerospace operations in 2026.
In September 2025, Dick’s completed its acquisition of Foot Locker Inc. (New York symbol FL), a leading footwear and apparel retailer, for $2.4 billion in cash and shares.
The acquisition provides Dick’s with a global platform for growth. Foot Locker’s store banners include Foot Locker, Kids Foot Locker, Champs, and others. The retailer has 2,400 stores across 20 countries, including the U.S., Canada, the U.K., Australia, and New Zealand.
Combining the two firms’ purchasing power and operations should also cut Dick’s annual costs by $100 million to $125 million. However, the retail industry is intensely competitive, and the uncertainty over tariffs adds risk.
Dick’s Sporting Goods is a hold.
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 in a subsidiary to its own investors if it’s all but certain that business, and the parent, will be better off after the spinoff.
2) Spinoffs involve a lot of work and legal fees. The parent will only spin off the unwanted subsidiary if it can’t sell the stock for what it feels it’s worth.
That’s why firms have an incentive to do spinoffs under two sets of favourable conditions: When they feel it is not a good time to sell (which often means it’s a good time to buy); or, when they feel the assets they plan to spin off will be worth substantially more in the future.
The split has worked out well for both—TC is up 15%, while South Bow has gained nearly 40%. Both stocks remain solid picks for even more gains and steady income. For your new buying, however, we prefer TC.
APTIV PLC $83 is a hold. The company (New York symbol APTV; Manufacturing & Industry sector; Shares outstanding: 217.8 million; Market cap: $18.1 billion; No dividend paid; Takeover Target Rating: Medium; www.aptiv.com) makes electronics hardware and software for self-driving cars. Its manufacturing facilities are mainly in Mexico, China and other parts of Asia, Europe, South America and Northern Africa.
PEPSICO INC. $141 is a hold. The company (Nasdaq symbol PEP; Consumer sector; Shares outstanding: 1.4 billion; Market cap: $197.4 billion; Dividend yield: 4.0%; Takeover Target Rating: Medium; www.pepsico.com) is the world’s second-largest soft-drink maker after Coca-Cola. Its other brands include Frito-Lay snacks, Gatorade sports drinks, and Quaker Oats cereals.