Stock Spin-offs are a good place to make money, right?  They have been reported to be for some time, but does that continue to be true? . . .  in different sectors?  . . . when the spin-offs are for different reasons?

An article on Investopedia has looked at the fate of spin-offs in the energy industry that have occurred in the last year with an eye to just such questions.

They look at Cenovus (CVE), EnCana (ECA), QEP Resources (QEP), and Questar, (STR).

It’s short and doesn’t provide any definitive answers, but it may provide some food for thought.

Tags: Cenova, CVE, ECA, Encana, QEP, QEP Resources, Questar, spin-off stock, stock spin-off, STR

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