Entergy’s (ETR) spin-off of nuclear power plants looks to be dead in the water according to a recent article from Reuters after the New York Public Services Commission rejected their most recent plan.

No one knows what the ETR board will decide to do next of course, but at some point managers as well as investors need to say . . . “Next!”  .  .  . and move on.

Stock spin-offs can make grand theater as this attempt illustrates, but entertainment should be,  at best,  a very very minor reason that you put attention on any stock or group of stocks.

An obvious part of trading discipline is keeping your attention focussed on what you are doing, but deciding when it is time to direct your attention elsewhere and doing that quickly and completely is just as important . . . and much harder for most people to master.

Tags: Entergy, ETR, focus, New York Public Service Commission, nuclear power, stock spin-off

In a recent article on CSD, the stock spin-off exchange traded fund, Claymore/Clear Spin-Off, Michael Johnston has given a very concise and complete look at the ETF.

CSD,  can serve the value investor seeking better than average returns in serveral ways.

• Of course, you can simply buy the fund.
• You can also use its portfolio as one source for building your watch list.
• And, the content of its quarterly and annual reports is a good source of educational information on spin-off stocks.

Depending on when you got into CSD it has been a very rough or a very rewarding ride for investors so far as shown by the chart below.

Splits:none

Tags: Claymore/Beacon ETF, CSD, ETF, spin-off stock, stock spin-off

In a recent article about Hospira, HSP, a 2004 spin-off stock,  the Lake County News-Sun illustrates one of the most direct pathways for a successful trade in a spin-off.

“At least two-thirds of my clients, most of them Abbott retirees, divested their Hospira holdings because Hospira was a new company and they were not certain about it,” said Roch Tranel, president of Tranel Financial Group, a financial planning firm based in Libertyville which has many Abbott retirees as clients.  His clients wanted to stick with Abbott, ABT, the parent company.

They didn’t want the new company’s stock, so they sold it.  And, while they were doing that, with all of its risks, uncertainties, high hopes, and positive potential,  the  new company started its life from our perspective as an excellent candidate for a long position.

20/20 hindsight shows us again that this turned out well.

Of course we don’t have 20/20 foresight, so entering one of these trades when lots of other people are heading for the exits can be a pretty stressful thing to do.

The right side of any chart is simply too empty to evoke feelings of calm.  Managing whatever your own particular level and style of that kind of discomfort is, is as important as finding the right stock to buy and figuring out a high percentage time to get in.   If you were born with a naturally cool head and keen eye for threading your way through uncertainty, count yourself  very lucky.  Most of need some form of trading stress management routine to keep us calm and clear-eyed enough to “pull the trigger” when the time is right.

Tags: Hospira, HSP, spin-off stock, stock spin-off, Value Investing

Updating the previous post, the New York Times reported that Simon Property Group Inc., SPG,  working with Brookfield Asset Management, BAM, is expected to up the offer for General Growth, GGP, in a deal that will most likely include a stock spin-off.

Tags: BAM, Brookfield, GGP, SPG, stock spin-off

Reuters has reported that General Growth Property, GGP, may be in discussions with Simon Property Group , SPG, to come out of bankruptcy with a plan from Simon that would include a stock spin-off of GGP’s residential property unit.

Simon Property Group Weekly Chart

If that were to turn out to be the case,  the SEC documents about both the parent and potential spin-off should be an interesting read.

BUSINESS SUMMARY

Simon Property Group, Inc. is a real estate investment trust. The firm engages in investment, ownership, and management of properties. It invests in the real estate markets across the globe. The firm’s portfolio includes regional malls, premium outlet centers, the mills, community / lifestyle centers, and international properties. Simon Property Group was founded in 1960 and is based in Indianapolis, Indiana.

from Yahoo Finance

Tags: GGC, SPG, stock spin-off

Trading and investing successfully is all about how you manage the inherent stresses in your trading plan. And, yes, every trading plan has its own stress signature.

It depends on such factors as the time frame, the number of pieces of information you must consider, the sizes of your positions, and other things.  Together they describe the outside components of your mind-body experience.

Your own personal style, abilities, beliefs, and skills make up the inner portion of the experience.  Some of these are under your control.  Some probably are not.

If you are going to be successful, the pieces have to fit together. Wishing you had the attributes of a day trader when you don’t or a long term investor when you don’t or a person who does all their own research when you hate wading through piles of data, and on and on, are sure fire prescriptions for not only mediocre results, but most likely some level of misery to boot.

Without getting any more touchy-feely than you’re comfortable with, you can take an inventory of what you bring, what you want, what you need, and match it to an approach for trading/investing that has the best chance for success and for being as low stress as fits you.

Tags: investing, stress, stress management, trading

Entergy, ETR, has been trying to complete a stock spinoff to separate its nuclear power plants for some time.   This may be a terrific deal for Entergy and maybe even a good one for the owners of the new entity to be called Enexus, but states in which those power plants are situated apparently aren’t so sure.

Rightly or wrongly, citizens seem to be saying that they “smell a rat”.  Perhaps they figure that when it’s time to shut down and clean up these plants Entergy wants to be sure that their deep corporate pockets are not available to the states in question if the Enexus doesn’t have enough money to do the job.  And if that happens, guess who will foot the bills.

In a recent Vermont Senate vote reported in the Rutland Herald, the relicensing of the Vermont Yankee plant in 2012 was blocked.

Which leads to a question that comes up every now and then.  Do you invest in a company because it is watching out for its own interests very well if you would feel that their actions were irresponsible if you lived next door to their operations?  I’ve never completely figured that one out for myself,  but I do try to remember that my purpose in investing is to make money.

Tags: Enexus, Entergy, ETR, nuclear power, Vermont Yankee

Dr. Pepper Snapple, DPS,  emerged in its present form as a stock spin-off in May of 2008.  

It has been noted that spin-off stocks often make their best moves in their second year.  This could be taken to suggest that during its first year a spin-off stock is likely to be a good value.

Looking at its chart with 20/20 hindsight, Dr. Pepper Snapple is a spin-off stock that could have been viewed as undervalued to varying degrees during most of its first year.

I believe it is Preston James, a guy who does workshops on trading stocks that have pre-announced higher earnings ahead, who recounts a story in which a man said to him “all I need to know is when to get in and when to get out.”  The story apparently gets a pretty consistent laugh, and yet . . . .  this is it, isn’t it?  When do we get in?  When do we get out?  DPS spent all of its first year lower in price than it is today near the end of its second year.  When “should” you have gotten in?  And when should you get out?

Given that the one thing we know about when this train leaves the station and when it gets to its destination is that it tends to happen when the largest number of riders aren’t prepared, what do we do?  Not really a cute or funny question when it’s your money.

In a general sense, this is a personal, psychological challenge related to how you deal with uncertainty and that is another whole topic.  In its most specific sense, it a challenge of looking for clues, tendencies, correlations, averages; your standard fuzzy types of stuff.

The “second year” observation may have something in it.  Any observations?   thoughts?   ideas?

From Yahoo Finance:  ”Dr Pepper Snapple Group, Inc. operates as a brand owner, manufacturer, and distributor of non-alcoholic beverages in the United States, Canada, Mexico, and the Caribbean. It offers flavored carbonated soft drinks (CSDs) and non-carbonated beverages (NCBs), including ready-to-drink teas, juices, juice drinks, and mixers.”

Tags: DPS, fear, greed, investing, psychology, psykchological, spin-off stock, Value Investing

The concept of seeking value is familiar to anyone who shops for groceries, but when it comes to value investing, carrying those learnings over can be deadly.

The grocery store makes it easy because it’s all right there.  From toilet paper to apples if you want to take the time you can calculate, prod, read, and decide which product has the best value for you.  And anyway, if that new brand that seemed to be such a deal isn’t, you’ll be going back to restock soon anyway.

Now turning to stocks, we want to buy low and sell high.  We want  to find stocks that are likely to go higher than they are now so that we can sell them and make money.   One way to do that is to find a stock that is a bargain, one that has good value.

The thing is, it can be very difficult to tell the difference between true value,  a stock whose price is low by the usual backward looking measures, but is actually priced just right going forward,( in other words one that is down there for good reason), and one that is irrationally, mistakenly, or unfairly undervalued.

Of course it is the latter that we value investors are looking for and spin-off stocks are a great place for find real value;  stocks whose price is depressed for reasons unrelated to the company’s prospects.  In Joel Greenblatt’s language, this is a pond into which we want  to throw our bait in hopes of hooking a big one.

Tags: spin-off stock, stock spin-off, value, Value Investing

In addition to the common list of reasons why spin-off stocks are likely to be good investments, the fact that they start without obvious sources of overhang.

The term overhang describes blocks of shares that are likely to be sold into a rising trend in the stock’s price, slowing or perhaps even stopping that rise.  In the markets right now you can see overhang in many issues by opening up first a daily 1 year chart and finding one of the many stocks that are up significantly over the past year.  Looks awfully good, doesn’t it?

Switch the chart view either to a 2 or 3 year chart.  Does the one you picked have a huge “mountain” on the left  side from the previous highs?  If it does, that is overhang.  And, what is that “mountain”?  Obviously it is a graphical representation of the path that the price of that stock has traveled over time, but more importantly it is a picture of everyone who bought shares at those prices that were higher than today’s price and are under water.  They are sitting on losses or they are out of the stock nursing their wounds from the losses they have taken.  The painful situation of the owners of those shares is literally hanging over the attempted rally.

At every level of the upward price path there is a new set of investors who are back to break even or are getting near enough to be thinking about getting out of this thing and just making it stop.  And, they are like an ongoing series of speed bumps or mudholes between you and where you want to go.

Spin-off stocks don’t have this.  Even when they head down for a while right out of the gate (and not all do), it is a different situation.  They are free of the reminders of past trades gone bad and once they start their uptrend they are moving into open spaces.

(Unless of course the spin-off was an IPO in which the parent had retained a significant number of shares as was recently the case with Bristol-Myers Squibb’s stock spin-off of Mead Johnson Nutritional which is another whole kettle of fish as discussed here earlier.)

Tags: Bristol-Myers Squibb, Mead Johnson Nutritional, overhang