Wall Street knows that making money is hard. That’s why it usually keeps special situations off the radar of everyday investors.
That means that few people are watching when special situations come around. And one of the best ways to make huge profits in the markets is to target areas that very few people are looking at.
But there’s one easy-to-understand special situation that even Wall Street tends to get wrong: spinoffs.
They happen when a company has a division that it believes would be worth more independently. So, the parent company spins off the division as a new company, giving it a life of its own. And shareholders of the parent company are given shares of the new company — for free.
We’ve found that Wall Street often ignores or undervalues these spinoffs. And that’s where we see opportunity.
Recently, several new spinoffs are making the news. And we expect more spinoffs to happen in the near future. But they aren’t all going to make outsized gains…
3 Headlines for the Week:
Not All Spinoffs Are Created Equal
No. 1: Dell Stock Jumps as It Unveils VMware Spinoff
Takeaway: Last Wednesday, computer company Dell announced it was spinning off software-maker VMware by the end of this year. As part of the plan, VMware will pay out a special cash dividend to shareholders, including Dell.
This will help reduce Dell’s debt. And that could be a good sign for the company, which is why Dell’s stock jumped as much as 9% intraday on the news. But while its spinoff announcement gave its stock a boost, other companies with similar news didn’t fare as well…
No. 2: Despite Strong Earnings and a Spinoff, McAfee’s Stock Is Sliding
Takeaway: McAfee is also spinning off a software division. On its recent earnings call, the computer security firm beat expectations. But its guidance for the future — which includes the upcoming spinoff — didn’t impress analysts.
They don’t expect McAfee’s spinoff to add much benefit to the parent company. Now, we don’t know whether or not this will be the case. But McAfee’s stock dropped nearly 10% that day.
And it’s not the only spinoff investors seem unsure about…
No. 3: IBM Spinoff Isn’t Attracting Much Excitement
Takeaway: IBM has had it tough since the pandemic started. The company has had manufacturing problems on several chips it’s developing, adding to the global chip shortage. And it’s had several quarters of declining revenue and earnings as a result.
But the company is trying to turn that momentum around. It just created the world’s first 2-nanometer chip, the smallest chip to date. This breakthrough could offer better performance and power usage for all kinds of devices, from smartphones to the computers in cars.
IBM also has plans to spin off one of its divisions that’s lagging in growth. But it seems most investors aren’t sure whether this decision will help improve IBM’s business again.
The bottom line is that not all spinoffs give investors the same opportunities. The good news is, we know how to find the best ones out there for you to take advantage of and profit…
1 Way to Profit:
A Proven Approach to Identifying Top Spinoffs
Special situations like spinoffs are a massive opportunity … if you know where to look.
And Alpha Investor founder and Wall Street veteran Charles Mizrahi knows exactly how to spot some of the best ones. He’s been researching spinoffs for years.
In fact, Charles has already recommended several spinoffs to readers of his Lifetime Profits service, which is dedicated to special-situation stocks. Take a look at the gains for yourself…
|
Parent Company |
Return | Spinoff Company |
Return |
| Nuance Communications, Inc. | 257% since October 2019 | Cerence, Inc. | 328% since December 2019 |
| Verint Systems Inc. | 75% since August 2020 | Cognyte Software | 31% since August 2020 |
| PROG Holdings | 4% since November 2020 | The Aaron’s Company | 71% since November 2020 |
| Synnex Corporation | 64% since November 2020 | Concentrix Corporation | 97% since November 2020 |
Now, most of these opportunities are already past Charles’ recommended buy-up-to prices. We don’t recommend you buy into them today.
But we expect to see more new spinoff opportunities on the horizon. And Charles is researching them to add to the Lifetime Profits model portfolio soon. They could hand you the same kind of returns as the ones above.
So, be sure to find out how you can gain access to this special-situations research service right here. You won’t want to miss out on Charles’ next opportunities.
1 Question for You:
What Special Situations Will You Take Advantage Of?
Special situations don’t only happen in the market. They can be a part of our daily lives, too.
For example, people are getting vaccinated and businesses are reopening. And it’s giving many of us the “special situation” to do certain activities for the first time again in months.
While your money works for you in the markets, what will you be doing with your friends and family to take advantage of our reopening world? Let us know by writing in right here.
Regards,
Senior Managing Editor, American Investor Today