Spin-offs + Weird Stocks
*****You can never have enough potential good ideas waiting in the “bullpen”.
Spin-offs are a great source of new ideas. These stocks often lack research coverage, and are often discarded by their new owners. You do not even have to invest in spin-offs at their very beginning, even several years after the spin these stocks lack a “deep” shareholders base. One small problem can cause the new shareholders to run for cover, and create a value opportunity.
I found a great list of recent spin-offs here:
http://thezenofinvesting.com/recent-spinoffs/
From this list I came up with the following that might interest value investors:
Madison Square Garden Ent. - MSGE - $45 - This in a popular value idea, maybe almost too popular. MSGE planning its own spin, which complicates the stock
RXO - RXO - $17 - The very recent spin of XPO’s truck brokerage business. I met the CFO of XPO pre-COVID and he told a great story about this business.
Masterbrand - MBC - $8 - The cabinet making business of Fortune Brands, which we covered in our building products post. Maybe too much debt?
FTAI Infrastructure - FIP - $3 - A strange collection of assets that needs more work. The aviation business left behind, symbol FTAI, might also be interesting.
Haleon - HLN - $8 - A large cap spin of Glaxo’s consumer business.
ZimVie - ZIMV - $9 - A very controversial spin from Zimmer that may have too much debt, but could also be a home run. Do your own work.
Kyndryl Holdings - KD - $13 - A very strange spin from IBM. I love it when dividend stocks like IBM spin something with no yield.
Victoria Secret - VSCO -$40 - A spin from L Brands. Intensive further research is needed.
GXO Logistics - GXO - $54 - Another spin of XPO, warehouses
Vontier - VNT - $24 - A strange collection of tech stuff. I know there is a Substack writer that likes this stock.
American Outdoor Brands - AOUT - $11 - A spin of Smith & Wesson’s non-gun business.
There are many more great ideas on this spin-off list. Please find your own favorites, this is just a sample.
This list has some great ideas. If I were building a model portfolio for March, 2023. I would be starting with this list right now. Dredging through industries is very educational and I will continue to do it. But if you want 5 quick ideas to fill out a portfolio, start with this list.
I apologize for having ideas like Intel and Omnicom in my original model portfolio, any of these ideas would have been better choices.
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Every good value manager/analyst needs build a list of “weird” companies to monitor.
My definition of weird is any company that does not fit neatly into a specific industry.
My old example was American Greetings (greeting cards). Few consumer products analysts covered the company, and AG did not really fit in retail. So for 20+ years it was just adrift. The internet killed the card business, but it was great stock to make money in for many years.
Here are my top 20 weird companies right now:
Cameco - CCJ - $25 - The only producing uranium stock unless you to venture to the Kazakhstan exchange
SunOpta - STKL - $9 - Specialty snack maker
The Marcus Corp. - $16 - A family run company that owns profitable movie theaters
Lindblad Expeditions - $11 - An unusual travel company crushed by COVID, similar to VIAD
Sally Beauty - SBH - $15 - Hair care products for professionals
Liquidity Services - LQDT - An asset liquidator, I met management recently and was impressed
Townsquare Media - TSQ - One of the few remaining radio stocks, Michael Dell owns 10%
Sibanye-Stillwater - SBSW - $12 - the largest platinum producer
Crimson Wine - CWGL - $6 - someone once told me the 2 worst things to own were racehorses and small wineries
1-800-Flowers.com FLWS - $10 - now really a gift giving retailer
Flowers Food - FLO - $27 - bakery business, 3rd largest holding of a great value manager
Fresh del Monte - FDP - $27 - fruits and veggies
Limoneria - LMNR - $14 - you guessed it, lemons, and maybe real estate
Primo Water - PRMW - $15 - bottled water distribution
Culp - CULP - $5 - a very small maker of mattress fabric
Canterbury Park - CPHC - $ 26 - a well run small race track and poker room
Natuzzi - NTZ - $8 - an Italian leather goods maker, traded in US
Trinity Industries - TRN - $28 - railcar maker, an oligopoly
B&G Foods - BGS - $14 - waiting for one more dividend cut
Coursera - COUR - $13 - busted IPO of education company
Many of the stocks deserve more research work. They are difficult to evaluate because there is nothing to compare them to. Please start building your own list. In a perfect world, I will get a chance to look at each of these stocks before 2024.