Even before spin-off stock of Babcock & Wilcox starts trading on the New Stock Exchange under its new ticker symbol, BWC,  the company is showing signs of what’s ahead with its recently announced alliance with Bechtel for small modular nuclear power plants,  (SMR=small modular reactor).

Babcock & Wilcox has been successfully putting nuclear reactors in demanding situations for years.  Their small modular reactors have kept the nuclear submarine and surface ships of the US Navy going  efficiently, safely, and largely unnoticed for decades.  Linking up with Bechtel to take this experience and skill out of the warships and out into the world certainly seems like a good idea on the surface of it.

For more details from someone who focuses on nuclear power generation issues, you might find this linked blog post on the Babcock & Wilcox/Bechtel Power venture.

As far as stock spin-off investing goes, we can only hope that most people don’t even know who Babcock & Wilcox are and what they do and only relate Bechtel to involvement in Boston’s “Big Dig”.  If that’s the case, with any luck they will bail out of BWC early, giving us a chance to get in at a good price.

We need every kilowatt we can scrape up in the future and when it comes to nuclear power generation, these two know what they are doing.

Tags: Babcock & Wilcox, Bechtel Power, nuclear power, spin-off stock, stock spin-off

To no one’s surprise, Frontier Communications, FTR, is down sharply on heavy volume after its stock spin-off from Verizon, VZ.    Actually, there must be someone who is surprised, but apparently they are part of a small group of Verizon shareholders who were backpacking in the wilderness or who get terribly bored thinking about money or something.

On my weekly charts I see that over the last 20 weeks FTR has had an average of  about 29 million shares change hands each week.  Last week the volume was 110,589 shares with the price opening the week at 7.56 and finishing Friday at 7.35.  Today by lunchtime on the East Coast today we’ve seen 27,332,000 shares change hands and the price is down nearly 5% at 7.01.

It  doesn’t take Jesse Livermore to detect the current trend in the spin-off stock here, but so what?  The question is always whether there is a workable opportunity in this action and if there is, how can we get on the profitable side of it?

Sooner or later this kind of thing usually gets over done, but in my limited experience, prices have an incredible ability to stay “too high” or “too low” for too long,  getting me too nervous and/or too financially stressed to hold on until the price comes back to “reality” (which is an odd choice of words since reality is clearly the price shown right on everyone’s screen at every moment.)

So, what to do?  For myself, (since as I mentioned in a previous post, my ADD won the day another time and I was amazed to find myself the proud owner of 12 shares of FTR,)  I am going to hold onto the shares received in the stock spin-off for their entertainment value if nothing else.

When and if I buy more FTR in the future will be determined by the trading plan that I put together some time ago far from the heat and confusion of the specific companies and businesses and business cycles.  Having tried to catch one falling knife too many, I find that having a plan and sticking to it is the only way I can stay sane and effective.

Tags: Frontier Communications, FTR, stock spin-off, stock spin-off investing, Verizon, VZ

Verizon’s (VZ) upcoming stock spin-off of Frontier, its landlines unit, is getting typical responses to the spin-off stock (dump it!) which can provide an opportunity for followers of spin-offs, but does it always?  Surely there are times when the contrarian idea that if everyone is doing, there must be money to be made by playing it in the other direction, is just plain wrong.

Still, even if they are exactly right given that their actions are predictable, is there an advantage to be gained from the odds that their correct actions are likely to be overdone?

Just asking.

Sounds like there may be a short term opportunity for the nimble.  What do you think?  How would you trade it?

7/2/2010  Oops!  Belated disclosure:  I got an electronic confirmation from an IRA that I rarely look at informing me that I have received shares in Frontier Communications as a result of the spin-off from Verizon which I had forgotten I owned.   For the record, I intend to keep the Frontier and may add to the position after other people who got notified that they now own a landline company that they never wanted sell it.

Tags: Frontier, spin-off stock, stock spin-off, Verizon, VZ

Motorola, MOT, has been going to do a stock spin-off of its cell phone business for a long time.  Just do an internet search on  Motorola spin off and you’ll get an idea of how many sources have written about this.  Sometimes it’s the “money losing cellphone unit” and sometimes it isn’t money losing in the stories, but it has always sounded at least a bit questionable from a shareholder perspective.  Sure, Motorola may be stronger without its cellphone business, but if I own MOT now and they split it apart giving me both pieces, the deal is a wash.

But that’s all different now.   According to Daily Finance author Dawn Kawamota, it is going to be structured so that the deal makes sense from both sides.

Sounds OK.  Fortunately for me and you, these things play out at what could be described at a grand pace.  Stock spin-offs are not for those with a short attention span, (at least if you have a good system of electronic alerts set up to wake you at opportune moments.)

There will be plenty of press releases, news articles, and SEC filings before you have to decide what you may want to do.

It could be a great opportunity for all involved . . . or not.  We’ll see.

Tags: MOT, Motorola, stock spin-off, stock spin-off investing

“When Do Analysts Add Value? Evidence From Corporate Spinoffs” , an academic paper, was the result of viewing 1739 analyst reports on corporate stock spinoffs.

My first response was to think just how thankful I am that the authors of the paper read all those analyst reports and not me!  They did it and I don’t have to.  They deserve another step toward tenure.  Seriously.  Whew!

Their observation that even though analysts could add a lot of information about the prospects of the spun off company, they usually don’t was not much of a surprise.  Even with all of the SEC documents that are filed on pro forma financials and the information in previous filings on the part the new entity played in the whole company in the past, it is common for it to seem like it is a pretty empty corner of analysis and prediction.

Actually, I sort of hope they don’t spur the analysts to get into this area more, since that lack of interest and information has always seemed to be a source of the mis-pricing that can create value in a stock spin-off.  There are precious few of those now that computers and the internet are flooding us with more information than most of us can deal with anyway.

In any event, the online synopsis of the paper reads easily for an academic piece and is worth a look.

Tags: analysts reports on spin-offs, spin-off stock, stock spin-off, stock spin-off investing

Vishay,VSH, has finally given us specifics of what the Vishay Precision Group, VPG, spin-off is going to look like if things go as they hope.

It will -

• result in the complete separation of the two companies
• be accomplished through a pro rata dividend of the outstanding shares of VPG owned by Vishay
• have a target date of July 6, 2010, if all requirements are met in time
• provide 1 share of VPG for each 14 shares of VSH held
• have a holder of record date of 5:00 pm, June 25, 2010
• start trading of VPG WI (when issued) June 23, 2010.

The company’s press release described the two components of the spinoff as follows:

“About Vishay Precision Group

Vishay Precision Group is a leading designer, manufacturer and marketer of Foil Technology Products (strain gages, ultra-precision foil resistors, and current sensors) and Weighing Modules and Control Systems (transducers/load cells, instruments, weigh modules, and control systems) for a wide variety of applications.”

“About Vishay Intertechnology

Vishay Intertechnology, Inc., 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. Vishay can be found on the Internet at http://www.vishay.com.”

There are still plenty of questions about whether this will be a good deal for investors or not.  At this point all I know is that it is a complete spin off, the two parts do seem to do different things, and the price/volume action after the stock spin-off will be there for everyone to see.  Right now my bias is positive, but I am going to be waiting for confirmation of that belief, both fundamental and technical.

People, with more knowledge of the industry and the company than I,  have voiced concerns that I take seriously.  I just don’t know what to do with the information other than to stay cautiously optimistic and be very alert for the issues in question affecting the deal and the companies’ performance going forward.

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

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