Upcoming investment ideas

[wildcat]

Just wanted to drop a note on a few ideas that I will be following and may have potential within the next year or so.  Spinoff season is right around the corner and I have done well with spinoffs in the past.  As most of you know the American Express FP division will become its own entity and may be worth a look.  Another that hasn't quite received as much attention is Dean's food division which includes a lot dairy/soy products outside of milk.  The new unit will be run by a former Keebler executive and the insiders will own quite a bit of the new company (so they should act in the interest of shareholders at least for a bit).  We may see Morgan Stanley unload a few divisions or at least the Discover unit.  Spinoffs can do well if they are in a decent, profitable business and if they do not have much wall street "hype" following their debut.  An immediate catalyst is just the new company's ability to function as a separate entity.  Many times the parent company, prior to the spinoff, will not allocate sufficient resources to a lagging unit.  However, this does not mean they are poor businesses just capital starved.  Usually the spinoffs I have bought have been good for 20-40% gains so you probably will not get rich overnight but a good, steady pop nonetheless.  Just something to follow.

 

[brewer12345]

I am very likely to buy a chunk of AEFA when AmEEx spins it off. Wilddcat, when have you typically bought a position? Right as the spin-off comes to market, or do you usually wait a while?

 

[wildcat]

I can usually get away with waiting a little while on spinoffs. However, I don't think you will lose money if you buy on the open. It seems to take a few quarters before analysts start to cover and recommend a spinoff.

 

[brewer12345]

Not sure if you caught this one, but Pitney Bowes will also be spinning its office equipment leasing business off. They mostly lease office equipment to small businesses and if it isn't saddled with too much debt at the get-go will probably be a very attractive investment.

 

[wildcat]

I think you nailed it brewer...you have to see what kind of "deal" the spin-off got from the parent company.

 

[brewer12345]

Yep, although I can already tell you that AEFA won't get too raw of a deal from their parent. In order to survive as a stand-alone entity selling life insurance, AEFA needs to maintain at least a Aa3/AA- rating on their insurance subs. The ratings agencies won't grant that without AEFA being given a good shake.