For an interesting take on Vishay Intertechnology’s (VSH) stock spin-off of the Vishay Precision group (VPG), check out this May 14, 2010 blog post on the spinoff by a guy who likes to read SEC filings just for pleasure.  He says he has no money and doesn’t buy anything, just likes to try to figure out what’s happening.

It looks to me like he’s done a heck of a job with the VSH – VPG reading.  I hope he does more.

I still don’t know how to figure the Zandman component of this whole deal.  Take a look at the comments on the previous post about this one.   Unless I am reading things wrong, these companies belong to the Zandmans and the rest of us have to decide whether to attach ourselves to their coat tails or not.  Does anyone have anything to add, either about that view or about the people involved?

Tags: stock spin-off, Vishay Intertechnology, VPG, VSH

Spin-off stock Clearwater Paper, CLW, has been separate from Potlatch Corporation since mid-December 2008 and it is time to check on how it has been doing since.  Looking at the chart below, the first question that is running through my mind is ‘Why isn’t there a disclosure of ownership interest on the bottom of this post?’

Splits:none                                                                                        chart from Yahoo Finance

Clearwater hasn’t done too badly for its shareholders in the nearly year and a half on its own, has it?  Showing an almost classic spin-off stock chart picture, the price dipped immediately after the spin-off, cosnsolidated and moved higher, only to make one more nerve jangling trip to the down side before started a potentially very rewarding trip upward for those who were on board.

So, why might someone not have taken advantage of this “secret” situation that was right out there in plain sight?  There were lots of “good” reasons for not taking action and clearly they weren’t good enough.

OK, Fall 2008 wasn’t a great time to be thinking about getting into a new long position . . . or was it?  Not many people were, but when was the last time that very many people were making very much money?  And, even if you had had the nerve to put on even a small trade, how would you have dealt with that second dip?  Would you have re-entered on the next move up?

The central point here has to be that the times during which it is hardest to get into a good trade are exactly the times when you have to have the mental discipline to shut out all the crowd noise, decide what your system calls for you to do, and do it!   By the time everyone knows it’s a good idea, it is too late.

Finding potentially rewarding situations is not the biggest challenge.  Setting aside all the internal barriers to making those trades is the big challenge. 

And that, my friends, is the real frontier here.  But that’s no secret either.  What apparently is a secret is what you have to do today, tomorrow, and the next day to build that self-knowledge, self-management, self-discipline when it’s clear you need more.

Tags: Clearwater Paper, CLW, emotional self-management, how-to, PCH, Potlatch Corp, self discipline, spin-off stock, stock spin-off, trading, trading discipline, trading plan

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

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

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

When Bristol-Myers Squibb did the stock spin-off of its Mead Johnson (MJN) nutritional unit I wasn’t too excited about it, because I figured that it didn’t fit the successful spin-off stock model that tends to create a value situation, but I overlooked one place where it did, and that turned out to be an important one.

Generally, the simple stock spin-off in which shares of the new company are distributed to current shareholders of the parent company is the easiest kind for me to understand.  People get shares whether they want them or not.  For various reasons many of them don’t want or can’t keep the shares they receive, so they sell them soon after the spin-off which drives the price down below where it “ought” be by common measures of value.

The IPO route taken by Bristol-Myers Squibb did not hand shares to people who were very likely not to want to keep them.  It sold them to willing buyers.  So, I asked myself where the value creation force is in that.  No one had shares they wanted to unload right away and if you look at MJN’s chart you will see that they didn’t.  But something else was at work.

BMY kept 83% of the total shares of the company.  What this did was limit the public float.

Public float describes the number of shares that you or I or anyone else can go buy on a stock exchange.  The public float does not include shares owned by officers, directors, or others with a very large stake in the company.  In other words people who can’t or are very unlikely to sell them.

Thus, for large scale investors, no matter how good MJN might look to them,  setting up large positions was very difficult or impossible.  They couldn’t get in without distorting the market .

Going back to the reasons I like spin-off stocks notice the one about how the “big guys” often aren’t interested or can’t go there.   When I wrote that I was thinking of a case in which the spin-off company was simply too small for most big investors.

What I hadn’t considered was how this same thing might be accomplished by holding back stock and creating a small public float.  Nor had it occurred to me that when they completed the spin-off by selling the rest of the shares, this would be the selling that pushed the price down as the chart seems to show the October, November, December time span.

So, there it is:  lesson learned, (I think).  Will I be smart enough to see signs that an IPO spin-off has this potential?  To work both the potential for big price movements due to the small float and not get caught flat footed when the rest of the shares are dumped onto the market?  Frankly, I don’t know.  I hope I’ll be smarter about it, but of course these things never look exactly alike.  I do know that I will not reject an IPO spin-off out of hand.  Beyond that, we’ll see.

Tags: BMY, Bristol-Myers Squibb, Mead, MJN

ABII Abraxis Bioscience

If you are wondering what Abraxis Bioscience has up its sleeve with respect to their previously announced stock spin-off, you apparently are going to have to wait until March 11, 2010, before the market opens.  That’s when they have scheduled their conference call to report 4th quarter 2009 results.

Given the comment to an earlier post here and a cursory look at an ABII chart,  it looks like from an investor’s point of view it is time to do something. Whether that’s a stock spin-off or something else is their business.  I just hope they get a bit less stingy with their plans and reasons as it goes forward so we have something to go on.

Tags: stock spin-off

PPD Inc., a contract research organization (CRO),  has filed SEC documents,   Form 10 Registration Statement,  that moves it a step closer to the previously announced stock spin-off of its compound partnering subsidiary, Furiex.

What is a CRO?    PPD Inc. has provided us with a webpage on CRO’s that has a podcast so that you don’t even have to read.

PPDI

Furiex is a wholly owned subsidiary of PPD and the plan is that it will be distributed to shareholders of PPDI as a stock dividend.  When the spin-off is complete, Furiex will be a completely separate, publicly traded company.

Their present timeline calls for the stock spin-off to occur in mid-2010, though they note in their press release announcing the spin-off that a number of things have to happen in the mean time.

A Triangle Business Journal article notes that PPD Inc. employs about 2,000 people in the Raleigh-Durham area of North Carolina.  Hopefully, given the amount of local interest that 2,000 jobs can stir up, we will be getting more information from this source in addition to what is filed with the SEC.

Tags: Form 10, Furiex, PPDI, spin-off stock, stock spin-off

In a terse stock spin-off announcement on January 28, 2010, Abraxis Bioscience (ABII) said that it would be spinning off Abraxis Health some time this year.  It was one of those statements that say everything and nothing, and leave you wondering what’s really going on.  Sort of like saying that the CFO is departing to “spend more time with his family”.

Here’s what they said:

“By spinning off Abraxis Health as an independent, stand-alone company, we believe we will enhance the intrinsic value of both companies by allowing each company to pursue its differing drug development and commercialization strategies,” said Patrick Soon-Shiong, M.D., Executive Chairman of Abraxis BioScience. “We also believe the spin-off will facilitate each company pursuing the most attractive long-term growth opportunities and business strategies, thereby maximizing shareholder value.”

Maximizing shareholder value is always good and we know the part about the separate units being able to pursue their own strategies.  But, is it a good deal for shareholders of the parent, the spin-off stock, or perhaps both?  Unlike the CFO leaving for more time with his family, we will be finding out.  The mandatory information that the company will be filing with the SEC will see to that. -

Now we just have to wait for those SEC filings and set aside the time to read them.   Then we can decide for ourselves whether there is indeed shareholder value in this or not.

Tags: ABII, Abraxis Bioscience, Abraxis Health

Encana spin-off Cenovus, CVE, closed today with its price at the lowest level that it has been since the stock spin-off, 41 days ago by my count.  Where is the “drop-right-after-the-spin-off-and-then head-higher” pattern that we’re looking for when we need it?

The often quoted studies on spin-off investing used stock price two years after the spin-off for their calculations and if my memory serves me correctly they found that most of it came in the second year.  Which brings up a significant psychological factor in making any trading plan work, which is how one sticks to the plan without getting thrown off by activity between getting in and when the plan calls for you to get out.

Where Cenovus will go from here is anyone’s guess.  Spin-off stocks tend to outperform.  Which is a way of saying that on the whole, spin-off stocks go up, but any particular one may or may not.

One thing is for sure and that is that when you don’t stick to your trading plan, whatever it is, you are at risk of getting caught on the wrong side of  the trade coming and going.

What does your trading plan call for here?  Do you get out on the new low?  If so, is it the end of the trade or will you re-enter?  Under what circumstances?  Or, have you decided that your exit will be two years after the spin-off?  Perhaps, you view the spin-off as having a positive bias and you will trade it long.

Whatever you decided when you got in, now is not the time to decide to throw the plan out the window and wing it.

Tags: Cenovus, CVE, spin-off stock, stock spin-off