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

A spinoff stock such as AOL always comes with a story and stories are dangerous if taken for more than they are worth.    For example, this recent Wall Street Journal article brings us a look at some of the “good” and the “bad” stories about the AOL spinoff.  The WSJ is passing on views from some very smart people.

What’s the danger in a story?  Lots as it turns out, especially when they are good ones well thought out and well written.

Stories are dangerous because they feed your desire to “know” what’s going to happen next.  And, thinking that you know what’s going to happen next in trading is like putting on blinders if not a full blindfold.

Someone once argued that the purpose of all thinking is to be able to stop thinking.  ”Ah, now I’ve got it!  Next.”  The big problem is that it is the very nature of our lives that we don’t know what is going to happen next.  Maybe all charts should  be printed with a big blank space over there on the right side where the unknown is lying in wait.

Given the possibilities for AOL in the WSJ article and those from other sources you may find, is AOL a good bet?  It is a spinoff, and that puts the odds in your favor.  It does seem to make sense to get it apart from Time Warner,  another positive.  And, the observation that the ratio of ads on the internet to the number of hours that eyeballs are on webpages is relatively low scores a big positive.  On the other hand, there are negatives too.

So, yes,  AOL does look like a candidate for a watchlist to me.  It is a reasonable place to direct some of your precious attention.  Is it’s stock price going to go up and outpace the market.  No one knows!  No one!

Watch your charts.  Watch price and volume.  When the stock breaks out by whatever criteria you have set in you trading plan,  buy it.  Just let it come to you and stay away from fortune telling.

Tags: AOL, spin-off stock, stock spin-off, trading plan, TWX

Whoever chose Hot Trading Secrets as the title for J. Christoph Amberger’s 2006 book definitely knows how to write a title.

Whose interest is not piqued by the offer to be let in on secrets?

When they added that it would tell How to Get In and Out of the Market with Huge Gains in Any Climate I knew that I was going to have to read it, even though I concluded long ago that the reasons many people make much more money than I do has very little to do with secrets.

I have read that a belief that other people achieve what they do and have what they have because they hold secrets, they have connections, they started with money, or they have whatever other unfair advantage you can think of , is often held by people who are depressed.

These beliefs aren’t simply excuses, but have been described as going along with an inability or unwillingness to map out a series of small steps that are most likely to lead on to a particular goal. Help these people not think in blocks, but rather in “bite-sized” pieces, and they are very likely to feel better and become more effective.

So, . . . I vowed to look for the tools, the skills, and the knowledge that Mr. Amberger was going to tell me that I would have to have or gain to be more successful, if he indeed knew.

What I found as I read along was that taken that way he did indeed have some very helpful perspectives and specific tools that I will be able to apply to my own situation; some right away and some over time.

- – – – – – – -

Given that this is an Agora publication, I knew from the outset that there was going to be lots of good stuff in it, perhaps secrets even, but that it was going to be woven into a great story and a subtle, but powerful, “sell” for something.   And, this turned out to be true.  (I suspect that this book might be at least as valuable for an aspiring copywriter as it is for an aspiring trader, but that need be neither here nor there.)

I found it to be well written, engaging, and quite effective at telling the story of how various component teams and services of the Taipan Group come to many of the trade recommendations that they make to their readers as well a how profitable the best ones have been.   There are a couple of references to “proprietory methods”, but for the most part they seem to have put it all out there.

There are links to Taipan websites and e-letters in the sidebar of each chapter, but the author truly has given enough information that you can do it yourself, or you can subscribe to one or several of the services that use the systems described.

There was enough valuable specific information to justify reading and re-reading this book for me, but probably the most valuable gift was a look into how effective systems are built and developed starting from specific observations about how the markets work.

-    -    -   -    -    -    -    -

Given the focus of this site on spin-off stocks,  I find myself with a better understanding of how important it is to remember  that the observation that spin off companies and their parent companies tend to outperform the general market and their sectors is good,  but that that is only a start.

Now I am looking at finding better ways to decide which spin-offs to enter, when, how, and when to get out.

I have not signed up for any newsletters or services  mentined in the book . . . . yet.

Tags: Agora Publishing, Amberger, book review, Hot Trading Secrets, spin-off stocks, trading, trading plan

Buying spin-off stocks has been found to be an excellent way to outperform the market, but it is not enough to simply find a spin-off and buy it. You have do more things than pick the right stock to be consistently successful.

What you need is a trading plan. Generally speaking, a trading plan includes at least:

• Some conditions that must be met before you do anything else; (usually called the set-up. ) What will be your sign that the time is right for your system to be most successful? For example, you might trade only spin-off stocks and their parent companies, or you might only consider stocks that are making an initial 52 week high, or that have risen a certain percentage on increased volume, or you might only enter positions when the market is trending up or down.
• What will have to occur for you to actually enter a new position. When the climate is right for your system, how are you going to find the best candidates for outsized gains? This might involve a break out of some kind such as rising above recent resistance, or forming a particular chart pattern such as the Wm. O’Neil “cup and handle”, or reporting an earnings surprise, or . . . . .
• The initial stop that will get you out of a trade if it doesn’t go as expected. This is how you protect your capital if you got it all wrong or something happened that you didn’t count on.
• The rules you will follow to make a profitable exit. There is no profit until you get out of the trade. How are you going to know when to get out?
• What size positions will you take and how you will get to that size? How much of your trading capital will you commit to each position? Will you enter in steps, or all at once?

Spin-off stocks are just a set-up, what I’ve been calling the watchlist. Where you go from there with your trading plan involves a number of decisions that you have to base on your capital, your abilities, your temperament, and anything else that you can think of that will affect your ability to carry out the plan without hesitation and without fail.

How you make the best match between yourself and the trading plan is both an art and a science. When it is right, everything else gets much easier.

As often been pointed out, you can’t be certain to win in the markets. All you can do is do what you have to to deserve to win and then live with the uncertainty with respect to gain or loss.

Tags: spin-off stocks, trading plan