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Spinoffs

COTY INC. $4.16 is a hold. The company (New York symbol COTY; Consumer sector; Shares outstanding: 873.9 million; Market cap: $3.6 billion; Dividend suspended in 2020; Takeover Target Rating: Medium; www.coty.com) is a leading maker of beauty and cosmetics products. Its main brands include CoverGirl, Max Factor, and Sally Hansen.

Due to strong competition from lower-cost brands, Coty is now exploring the sale (or spinoff) of its mass color cosmetics portfolio, which includes brands such as CoverGirl, Rimmel, Sally Hansen and Max Factor. Those products have annual sales of $1.2 billion, or about 20% of Coty’s total sales. The company is also considering selling its Brazilian operations, which generate annuals sales of $400 million.

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Pat McKeough

Spinoffs

These spinoffs have long-term appeal

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Pat McKeough

Spinoffs

New director will help merger talks

PERFORMANCE FOOD GROUP CO. $101 is a hold. The company (New York symbol PFGC; Consumer sector; Shares outstanding: 156.5 million; Market cap: $15.8 billion; No dividend paid; Takeover Target Rating: Medium; www.pfgc.com) distributes more than 250,000 food and food-related products in North America from 155 distribution centres to over 300,000 customers in the food-away-from-home industry.

The company is now discussing a potential merger with rival US Foods Holding Co. (New York symbol USFD).

1 min read

Pat McKeough

Spinoffs

Entertainment firms draw activists

Shares of these two entertainment companies are still below their pre-pandemic levels. That has attracted activist investors who aim to spur their stock prices with asset sales or spinoffs. Even so, we feel both offer limited prospects.

CINEPLEX INC. $12 is a hold. The company (Toronto symbol CGX; Consumer sector; Shares outstanding: 63.4 million; Market cap: $760.8 million; Dividend suspended in March 2020; Takeover Target Rating: Medium; www.cineplex.com) is Canada’s largest operator of movie theatres with 155 locations (1,607 screens). It also operates 16 location-based entertainment venues in seven provinces.

2 min read

Pat McKeough

Spinoffs

Corteva plans a spinoff of its own

Corteva took its current form when the old DowDuPont spun it off as part of the three-way breakup of its operations.

On June 1, 2019, DowDuPont investors received one Corteva share for every three shares they held. Since the spinoff, Corteva’s shares have jumped 118%.

Corteva now plans to split its seeds and chemical operations into two separate, publicly traded firms.

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Pat McKeough

Spinoffs

Spinoff spotlight

JOHNSON & JOHNSON $193 is a spinoff buy. The company (New York symbol JNJ; Manufacturing sector; Shares outstanding: 2.4 billion; Market cap: $463.2 billion; Dividend yield: 2.7%; Takeover Target Rating: Medium; www.jnj.com) sold shares of its consumer drug business, Kenvue Inc. (New York symbol KVUE), in May 2023 to the public at $22.00 a share. It later let its own shareholders exchange JNJ shares for Kenvue shares at a 7% discount.

The company now plans a second spinoff—its Orthopaedics business. Called DePuy Synthes, it makes hip, knee, and shoulder implants as well as surgical instruments. Its 2024 sales of $9.2 billion represented 10% of Johnson & Johnson’s total revenue. The company will probably complete the transaction in early 2027.

1 min read

Pat McKeough

Spinoffs

Honeywell targets ‘pure-play’ gains

Diversified manufacturing firm Honeywell now plans to break up into three new companies. That follows pressure from activist investor Elliott Investment Management, which owns $5 billion of Honeywell’s shares.

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.

3 min read

Pat McKeough

How To Invest

Q: I would be interested in your thoughts on Signet Jewelers (SIG) in the U.S. Thanks.

A: Signet Jewelers Ltd., $106.58, symbol SIG on New York (Shares outstanding: 41.0 million; Market cap: $4.0 billion; www.signetjewelers.com), is the world’s largest retailer of diamond jewellery.

The company operates roughly 2,623 stores, most under the names Kay Jewelers, Zales, Jared, Banter by Piercing Pagoda, Diamonds Direct, JamesAllen.com, Rocksbox, Peoples Jewellers, H. Samuel, and Ernest Jones.

In September 2022, Signet completed its acquisition of Seattle-based Blue Nile for $360 million. Blue Nile is a leading online retailer of engagement rings, wedding rings and fine jewellery.

2 min read

Pat McKeough

How To Invest

Q: May I have your comments/thoughts on Crombie REIT (CRR.UN)? Thank you.

A: Crombie Real Estate Investment Trust, $15.32, symbol CRR.UN on Toronto (Units outstanding: 109.6 million; Market cap: $2.9 billion; www.crombie.ca), owns, runs, and develops real estate assets.

This REIT has 306 properties making up about 8.8 million square feet. Retail properties account for 79.4% of that square footage, followed by retail-related industrial at 13.1%, office, 4.3%, and mixed-use residential, 3.2%.

Crombie’s occupancy rate is a high 97.2%.

3 min read

Pat McKeough

How To Invest

Q: Pat, what are your thoughts on The Cooper Companies? Thanks in advance.

A: The Cooper Companies Inc., $75.28, symbol COO on Nasdaq (Shares outstanding: 198.8 million; Market cap: $13.7 billion; www.coopercos.com), is a California-based healthcare business with two operating segments.

The first segment is Cooper Vision (67% of revenues); it makes and sells soft contact lenses for the vision-correction market worldwide. Cooper Vision specializes in lenses for common eye conditions like astigmatism, presbyopia, myopia, and ocular dryness.

The second segment, Cooper Surgical (33%), focuses on fertility and women’s health. It develops and markets the medical devices, diagnostic products and surgical instruments used by gynecologists and obstetricians.

Over the years, Cooper has expanded significantly through acquisitions.

2 min read

Pat McKeough

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Spinoffs

One of the ways a company can try to unlock its own hidden value is by creating a separate company out of a corporate subsidiary. The parent company can either sell stock in the new company to the public, or spin it off—hand the stock out to its own investors.

Dividend Stocks

Dividend stocks make cash payouts that serve as a way for companies to share the wealth they’ve accumulated. These payouts are drawn from earnings and cash flow and paid to the shareholders of the company. Typically, these dividends are paid quarterly, although they may be paid annually or even monthly as well.

ETFs

What are ETFs?

ETF is an acronym for exchange traded fund. These exchange traded funds are used to track indexes as closely as possible, since investors cannot actually buy an index outright.

Value Stocks

What are value stocks?

One of the sweetest and most profitable pleasures of successful investing is to buy high-quality “value stocks” (or stocks that are reasonably priced, if not cheap, in relation to its sales, earnings or assets), then hold on to them as mainstream investors recognize the value and push up the share price.

Blue Chip Stocks

Blue chip stocks are big, well-established, dividend-paying corporations with strong business prospects. These are companies that also have sound management that should be able to make the right moves to keep competing successfully in a changing marketplace.

Penny Stocks

A penny stock in general trades for under five dollars a share, and as the name implies, sometimes for pennies. Most of the time they’re young companies, or start-ups in speculative markets like mining or technology.

Growth Stocks

Growth stocks are companies that are likely to have sales and earnings growth well above market average. Frequently they pay few, if any, dividends. Instead they typically reinvest any extra cash flow to promote further growth. Chosen wisely—according to Pat McKeough’s advice—high-quality growth-oriented stocks can be worthwhile additions to most well-diversified portfolios.

Wealth Management

Wealth management is the practice of putting your savings to work so that it continues to grow over your lifetime and will also benefit your heirs. Wealth management encompasses many different areas of investing like long term investment planning and retirement planning.

Mining Stocks

Mining stocks are investments in companies that produce or explore for minerals. Some of these minerals include uranium, coal, molybdenum (which is used in steelmaking), copper, silver and gold. They are affected by fluctuating commodity prices in addition to their own business and operating risks.

How To Invest

Pat McKeough has been making investing for beginners simple—and profitable—by helping investors make big gains for more than 25 years. His advice to beginning investors is the same as it is for all investors: buy high-quality, mostly dividend paying stocks (or ETFs that hold these stocks) and evenly spread your investments over the five main economic sectors (Resources, Manufacturing, Finance, Utilities and Consumer). Pat also believes investors should avoid stocks in the broker/media limelight and focus on those with hidden or little-noticed assets.

Energy Stocks

What are energy stocks?

Businesses that work in the extraction, refining and delivery of energy sources such as natural gas, oil, uranium and coal, are considered energy stocks.