Stock Spin-Offs

The Questar board of directors affirmed their plan to spin-off their exploration and production components at their recent meeting.

In a press release after the meeting the company said,   “After the spin-off, Questar would remain an integrated natural gas company comprised of subsidiaries Wexpro Company, Questar Pipeline Company, and Questar Gas Company. Questar’s corporate headquarters would remain in Salt Lake City. QEP Resources, Inc. (formerly Questar Market Resources) would be comprised of subsidiaries Questar Exploration & Production, Questar Gas Management, and Questar Energy Trading. Following the spin, the QEP Resources subsidiaries would be renamed QEP Energy, QEP Field Services, and QEP Marketing, respectively. QEP Resources would be headquartered in Denver, Colorado.”

So, they would end up with two companies, one a steady natural gas company that pays dividends, and the other an exploration and production company that is more directly tied to the price of and demand for the commodity.  It sounds logical, so why are they hedging on whether they will actually complete the transaction or not?

If you want to read it in their own words, look at the transcript of the Q&A. What I took from the long answer is that so many things have to be worked out with so many people that at some point you have to let people know what you are doing or it gets strange.  Reading the whole transcript I concluded that  they want to do it.  They believe it is a good idea. It is a very complicated process.

It was noted that they have done business as one entity for 80 years and having two stand alone units is a new thing to them.  And, the number of interconnections with banks, lines of credit, contractual agreements apparently is mind boggling.

For our purposes it was helpful to hear that they will probably be saying very little if anything publicly between now and an announcement that it will or will not go ahead.  So, we wait and watch.

Tags: natural gas, Questar, stock spin-off, STR

Tyco International Ltd, TYC, has announced the upcoming stock spinoff of its  electrical and metals unit.  The company says that the spinoff will help the parent focus on security, fire systems, and flow control, while the new entity will be better able to do the same with what it does which is making galvanized tubing, electrical conduit, and framing systems.

Enhancing the ability of management to focus their attention is a standard reason for a spin-off and this one looks like it will do that.  Sometimes when companies are taking things apart I find myself wondering what they were thinking when they were putting the pieces together.

One of the reasons cited for this being good for Tyco is less earnings volatility from not being exposed to construction cycles.

From the perspective of being an investor in the spin-off stock this exposure may not be so positive or at least call for an awareness of the cyclical nature of the demand for tubing, conduit, and framing systems.

This seems to be a good example of why the question “are stock spin-offs good?” can’t really be answered beyond saying that they tend to be.  It all depends.   Men tend to be taller than women, but when you stand one woman next to one man there is no certainty that the man will be taller.

Tags: spin-off stock, stock spin-off, TYC, tyco International

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

Vishay Intertechnology’s planned stock spinoff of the Vishay Precision Group is still on for some time in the middle of 2010 according to Dr. Felix Zandman, Executive Chairman of the Board and Chief Technical and Business Development Officer.

Spinoffs are good place to look for watchlist candidates in general, but they are even better when the companies involved are healthy and growing, which appears to be the case with Vishay.  While their reported 1st quarter earnings were positive, they missed estimates on revenue and the stock’s price is off in early going today.  Still, the book-to-bill ratio was reported to be very strong and that coupled with increased manufacturing capacity bodes well for the future.

The stock spin-off provides a reason to look more closely at the parent company and the spin-off.  Perhaps one or both will be put on your watchlist.  Eventual entry depends on confirmation of some sort that fits your trading system, be it fundamental or technical.  In this case, I have adequate reasons for both the parent and the spin-off to go onto my watchlist.  What happens from there, time will tell.

Vishay Intertechnology describes itself as a Fortune 1,000 Company listed on the NYSE (VSH), is one of the world’s largest manufacturers of discrete semiconductors (diodes, rectifiers, transistors, and optoelectronics and selected ICs) and passive electronic components (resistors, capacitors, inductors, sensors, and transducers). These components are used in virtually all types of electronic devices and equipment, in the industrial, computing, automotive, consumer, telecommunications, military, aerospace, and medical markets. Its product innovations, successful acquisition strategy, and ability to provide “one-stop shop” service have made Vishay a global industry leader.

Tags: spin-off stock, stock spin-off, trading plan, Vishay Intertechnology, vishay precision group, VSH

I recently came across an excellent article on how to invest by Rohit Chauhan. While it is quite basic on many points, the way he puts it all together was very helpful to me.

I especially appreciated his conclusion -

“So… what’s the catch ? The catch is — us! A lot of investors like to get all excited and thrilled, when investing in the market. They want to chase the hottest stock, so that they can boast about it to their friends. At the same time, they ignore the gems lying right in front on them.  Investing is simple, but not easy. ”

I love it!  . . . . . “What’s the catch?  The catch is –us!”   Reminds me of that old comic strip quote from Pogo – “We have met the enemy and they are us.”

I agree.  The catch is us.  So it follows that that is where our attention should be.

(Oh, and by the way, he is writing about the Indian market, so you don’t have to get distracted by his examples unless you have access to that market.  At least for me, that helped me not be looking for specific stocks or other distractions from his message.)

Tags: how to invest, investing article

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

It has been about a year since we looked at Brinks Home Security Holdings, ticker CFL.    At that time it had been around for about 90 days and had its price had gone pretty much sideways.  How’s it doing now?

Well, the above chart from Yahoo Finance that shows CFL compared to the parent company, Brinks,  BCO pretty much tells the story for this one so far.

The two charts underscore the importance of – -

• knowing when you will decide that a trade isn’t doing what you’d expected going and then sticking to it, in the case of BCO
• and,  following your plan when things aren’t happening quite as quickly as you had hoped, in the case of CFL

Whether you had picked the parent or the spin-off stock, it is likely that some emotional self-management would have been called for in order to exhibit the kind of trade discipline that make for a long term ascending equity curve.

Now some including the Motley Fool are suggesting that it is time for the parent to shine.  For the sake of those who held onto BCO after the stock spin-off of the home security business, let’s hope they are right.

Tags: BCO, Brinks Co., Brinks Home Security, CFL, emotional self-management, spin-off stock, stock spin-off, trading discipline

This is a simple, well written book on financial statements.  From the best I can tell as a non-accountant, it’s got most everything you need to know to do a good, workmanlike analysis of a financial statement including references for  those cases where you need more.

Tags: book review, financial statements, Financial Statements DeMystified

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