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