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

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

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

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

McDermott International announced in December 2009 that intended to do a stock spin-off of its Babcock & Wilcox Power Generation unit.  Yesterday they said that the spin-off is on track .

Their financials also showed that the offshore oil & gas services did very well while power generation lagged, so it would appear that casting off the power generation unit promises to a positive for the parent as well as the spin-off stock.

The pacing of this process illustrates what is a real positive in spin-offs for me in that it doesn’t happen fast.  There is time to read the filings and figure out what you want to do.  Being front run by a computer that has made its decision before you can read the title of the press release seems unlikely and with any luck the guys with those fancy computers will go somewhere else.

As for Babcock & Wilcox, this looks like a classic case where they are being given a chance to show what they can do on their own.  Let’s just hope the structure of the stock spinoff gives them a fighting chance to succeed and prosper.  You may want to look at the B & W website to make up your own mind, but these people look to be in the right place at the right time on several fronts to me.

Tags: Babcock & Wilcox, McDermott International, MDR, spin-off stock, 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

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