Spin-off stocks have been described as one way to find names that will move against a downtrending market, but that doesn’t mean that we can just throw money at them and consistently make money.

Harking back to Gerald Loeb’s admonition that you need a reason and a move before entering a position, yes, stock spin-offs do provide a reason, but the move has to present itself.

Remember that 80% of stocks move along with the overall market. If you are going to enter a situation in which you know that 4 out of 5 stocks are going to follow the trend down, you’d better let the price and volume to come to you.

You can decide when that move is happening in a number of ways and the one you choose is up to you. There are several ways to go, ideally you can find one that makes sense to you and that is clear enough that you can do use it consistently.

Tags: spin-off stocks, trend, Value Investing

The following are recent stock spin-offs of which I am aware. If you find other, please let me know and I’ll add them.

John Bean Technology (JBT) from FMC Technology (FTI)

Home Shopping Network (HSNI) from IAC

TREE.com (TREE) from IAC

International Leisure Group (ILGI) from IAC

Ticketmaster (TKTM) from IAC

Patriot Coal (PCX) from Peabody Energy (BTU)

Time Warner Cable (TWC) from Time Warner (TWX)

Dr. Pepper Snapple (DPS) from Cadbury

Brinks Home Security Holdings (CFL) from The Brinks Company (BCO)

Canadian oil sands unit, Cenovus from Encana (ECA.to),  {early 2009)

Tags: stock spin-off

Apparently, when the going gets tough and businesses are trying to figure out how to make it to the other side of the crisis without going out of business, a spin off of something is often somewhere in the plan. Lehman was going to do it with real estate mortgages, Altria with cigarettes, AIG with its aircraft leasing unit, and now here comes GE with some part of all the financing they do.

It makes sense really to sequester the unknown and potentially toxic parts of the enterprise and not let them sink the whole operation. The question for us is, how is the spun off portion valued by the market. In this environment it would not be surprising at all to have people not want to touch this kind of stuff with a ten foot pole.

You can find a very detailed look at what might affect a GE spin off plan, take a look at the BoomBust Blog.

Tags: GE, spin off

Spin-off stock, John Bean Technology (JBT) reached a new high Monday, a day on which only 39 stocks made new 52 week highs. Of course JBT is a recent spin off from FTI and has a very short history. Still, there it is on a day when most names were going down it was going up.

We’ll have to keep watching this one.

Tags: spin-off stock

Stock spin-offs apparently can indeed occur in good times and bad. Now there is news that the ailing insurance company AIG is considering a spin off of its aircraft leasing business. Put this right after Lehman’s talking about packaging up a basket of questionable real estate mortgages and setting them off with some cash in a new company that they were going to lay in the laps of shareholders, and you’ve some interesting times for sure.

There’s no specific news exactly how either deal will actually happen, if they happen at all, but I sure looks to me as though there’s a good chance that there will be recipients who don’t want the stuff. Of course, the question is whether we do or not, under what conditions, at what price. Thank heaven for the SEC documents.

I found the news of this one buried inside an article about Bank of America and Merrill Lynch. You can read the whole article about the AIG aircraft unit spin-off here.

Tags: AIG, stock spin-off

The Brinks Company, BCO, famous for its armored trucks that carry cash around for banks, business, and the like, has announced that it will spin off its home security unit. Brinks shareholders as of October 21, 2008, will receive one share of the new company, Brinks Home Security Holdings, for each share of Brinks.

Brinks Home Security Holdings is applying to trade under the symbol CFL. So far the logic of choosing that symbol has not been divulged, nor has the registration statement been filed, but they assure us that is all in process.

It will be interesting to see how the two parts divide out. Not that “home” anything feels too appetizing just now, but perhaps management will illuminate us on how this might be a real opportunity in the form 10.

Tags: BCO, Brinks, spin off

Looks like IAC’s spin off of Tickemaster (TKTM) came just in the nick of time. Barely out of the box, the new company lost an account that provided about 6% of their business and the stock dropped 17%.

Spin offs, IPO’s, price/earnings, price/book or any other single screening tool can be a big help, but they just tell you where you are likely to find winners. What any given stock’s price will do on any given day is unknown until it does it.

We learned that one here, big time.

And, while the professors may be able to put all the spin offs into their computers and crunch the numbers, most of us can’t buy all of them. We have to choose. Hopefully, we choose well and do better than the average for the group. Hopefully, we have risk management tools at the ready and we limit our losses. However you look at it though, one Ticketmaster or, God forbid, Lehman Brothers, can take the shine off a portfolio for quite a while.

Tags: risk management, stock spin-off, Ticketmaster, TKTM, Value Investing

Lehman Brothers (LEH) with its back to the wall says that it will spin off about $32 billion of commercial real estate mortgage holdings to shareholders early next year.

As reported in the New York Times, apparently Lehman can’t find anyone to sell these mortgages to, so they are going to separate them off from the rest of Lehman and give them to shareholders in the form of a new public company.

No one knows how this is going to happen right now and while there is a lot of questioning of which mortgages will be in the new company and which they will keep with the parent, we won’t know until they file the details with the SEC.

It is going to be very interesting to see what they put in there and to watch what the unwilling recipients do with the stock. Having watched their stock lose nearly 50% of its value in one day this week, I can’t imagine that many shareholders are particularly enthusiastic about the prospects of this or any other move by Lehman being good for them, but time will tell.

So far it sounds like a classic spin-off scenario and don’t be too surprised if it comes out in a form that is hard to read through and even harder to figure out. Our goal will be, as always, to try to figure out what’s in it for the insiders.

Here’s the complete New York Times article on the Lehman Brothers spin-off plans as they are known now.

Tags: leh, lehman brothers, real estate spin-off

Chesapeake Energy is planning a stock spin-off of its midstream natural gas operations. Apparently they haven’t said exactly what they are going to do or in what form it will occur. What they did say was that it was intended to “extract value from assets”, whatever that means.

Whether this will result in an attractive investment remains to be seen. I guess it is back to the old Joel Greenblatt question of what’s in it for whom. For that, as always, we are going to have to read their official filings of just exactly what they are going to do.

On the surface of it, midstream operations can provide good cash flow and stability since owning the pipes and storage and delivery facilities means you collect your fees no matter what the stuff going though them is costing at the moment. If you don’t screw it up, you should be able to keep cashing the checks for a long time. That should be good.

Will we get a chance to get in on this stock spin-off at a good price? Only time will tell.

At the moment, I can’t see why the new company should be undervalued out of the box. Maybe just size or energy investors not really wanting to be in the midstream part of the business will cause them to unload the new shares. Maybe if it comes out at an MLP that structure will depress the early prices. Who knows? Keep watching.

As so often happens, maybe I’m missing something. Read the story about the Chesapeake Energy stock spin-off plans.

Tags: CHK, mlp, stock spin-off, stock spin-off investing, Value Investing