Publicly Traded Spinoffs

Ever since I read the book, “You Can Be a Stock Market Genius” by Joel Greenblatt, I’ve been obsessed with Spinoffs. Spinoffs give you a reward for holding the shares of a particular company, by giving you shares of the newly traded company.

Even better, Joel Greenblatt showcases data that most spinoffs do well within the first few years of separating from the original company, and getting to shine all on its own. Pretty much the entire reason for the spin off. Profitable companies or sectors of a business may be overshadowed by debt or other bigger items, but a spinoff allows the market to look at that company on it’s own and make a new case.

I really enjoyed waking up and seeing a different company in my portfolio. How did that get there? Researching and finding out that 3M (MMM) or some other company has completed a spin off and gaining shares of a new company.

After reading that book, it got me thinking, what if I got in front of the spinoff, and began researching upcoming possible spinoffs. Now, they aren’t guaranteed, and not every spinoff is a great opportunity, so make sure you do your due diligence. After looking into a few upcoming, I recently purchased some Western Digital (WD) and Unilever (UL).

WD is spinning off it’s Flash Memory company, which allows both aspects of WD to be seen, instead of HDD over SSD. They are a leader in Flash Memory and it’s time for that to be noticed by the market, instead of being seen as an old fashioned company still churning out hard drives with platters.

Now, UL, they are spinning off their Ice Cream business, which happens to be Ben & Jerry’s! Who doesn’t love some ice cream? Also, who does ice cream better than Ben & Jerry? It seems like an interesting play, and although it’s not a big position, we did buy some. If spinoffs typically increase in price, and there is brand loyalty for B&J, it might just be something fun to hold in the portfolio.

These two plays are speculative, and are not a major, or even minor part of the portfolio. Almost an investing experiment. Remember, never invest with money that you may need today or tomorrow.

There are plenty of other spinoffs proposed, and some are far out. Are there any that you’re interested in?