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.”

Judging from a recent article on the spin-off stock CFL in Investors’ Business Daily,  the company is in an excellent position to continue to outperform the market.

Those of us who trade our own accounts do not get any points for beating the market, however.   What we need now is evidence that this is not only an excellent company that is doing the kinds of things that can make spin-offs great investments and contribute to their outperforming, but that its price is going up and will continue to go up long enough for us to make a profit.

In the much over-quoted line from the movie Jerry McGuire,  now we have to say “Show me the money.”

Going back to the same source where we got the fundamental information about Brinks Home Security Holdings’ business, the IBD,  hard as it is sometimes to remember,  about 80% of stocks move in the direction of the overall market trend and that trend is down right now.

Yes, that leaves 20% ( 1 out of 5 ) that are going the other way.   With the right kind of move and the right trading system it is possible to be on the 1 out of  5 side of the probability and still make money,  but it is hard to do.  You’d better be very disciplined and very alert if you want to take that on.

Remember, when the pros talk about their greatest enemy being ego, they are talking about things like believing that we are the smart ones who can pick the  1 of 5 stock and make money while everyone else is losing.

Brinks Home Security Holdings (CFL) might be the one to buck the trend . . . . its price has been trending up since November 12, 2008.

For myself, I am going wait, watching price and volume on CFL and the overall market for some clearer signs before deciding whether to enter or not.  I am definitely watching this one more closely than most.

Seems like a sane thing to do given not only the level of current economic slowing down and uncertainty.

Any investing model is based on assumptions about how prices of securities are arrived at.  In times like these when the  rules of the game seem to be in flux,  maybe  to eventually settle down and go on more or less as before or maybe to change significantly, perhaps it is best to stay alert, watch and wait.  This goes for individual companies as well as for us.

The real trick, it seems to me, is to not “go to sleep at the switch” and miss the signs that a new trend is shaping up while trying to not get impulsive.

I believe it was Gerald Loeb who said many years ago that for us investors that it is not just fear and greed that push us into bad decisions, but also impatience.

Staying patient and awake.  That is the challenge now.