How to Make Money When Companies Slim Down
Investing just got a lot harder.
After the market bottomed in March 2009, the S&P 500 soared as high as 800%.
But the game has changed over the past six months.
Inflation is now at its highest level in 40 years.
And the Federal Reserve is no longer offering cheap money.
The two tailwinds pushing stocks higher for the past decade are no longer.
As if on cue, the S&P 500, Dow Jones and Nasdaq are all sharply lower on the year.
The S&P 500 Index is now officially in a bear market.
Growth stocks with great stories but little to no profits — like Snap, Etsy and Wayfair — are down 80% to 90% from their highs.
The ARK Innovation ETF had a fantastic year in 2020, with monster gains of 153%.
It’s now given back all of those gains, and then some … all the way back to October 2019.
On the surface, stocks look terrible. So, investors are dumping them.
And with the Fed hiking interest rates, it’s becoming even more difficult for investors to make money.
But while most investors are hiding under their beds, I’ve been finding pockets of opportunities…
This is where my close to 40 years of experience comes in — I know where to look.
One area that’s looking very attractive now is spinoffs.
Spinoffs are companies that trade independently after separating from their parent companies.
Warren Buffett calls them “securities with a timetable.”
Because spinoffs happen based on calendar dates.
It doesn’t matter if we’re in a bull or bear market.
It’s why they’re my favorite catalyst to make money.
And I’m seeing a bumper crop of spinoff opportunities happening soon.
The effects of COVID-19 on the market is forcing CEOs to rethink their businesses.
Investors now have a shorter fuse for companies to show them the money.
And that’s leading to three reasons why I’m seeing more spinoffs happening now…
- Companies are being forced to increase their bottom line. So, out go weak divisions.
- Activist investors want companies to unlock value ASAP, and spinoffs can make that happen.
- Recent Biden administration regulations are pushing companies to do spinoffs instead of acquisitions or mergers.
The great thing about spinoffs is that Wall Street often doesn’t spend much time looking at them.
That gives investors like us a huge advantage.
Over the next few days, I’ll be sharing some spinoff ideas that I have in my calendar.
I’ll let you know why I (and many other investing legends) love them — and just how big of a profit opportunity they can create for us.
So, keep an eye on your inbox for my Real Talk this week!
Founder, Alpha Investor