PepsiCo reiterates earnings outlook originally appeared on BloggingStocks on Wed, 14 Nov 2007 10:10:00 EST. Please see our terms for use of feeds.

Spinoffs frequently struggle immediately after they are freed from the clutches of their former parent company. Shareholders of the larger company are given stock in a company they may not want and, because of the smaller size, many funds can't hold the shares and must liquidate them -- the result is pressure on the price.

According to The Wall Street Journal, recent spinoffs have been beaten down [subscription required] even more than investors have come to expect. Broadridge Financial Solutions, Covidien, Tyco Electronics, and Discover Financial Services, have been creamed in the short-time that they've been trading.

Does this present an opportunity for patient investors? I haven't looked at all of these companies individually but the statistics provide very compelling evidence that spinoffs deserve at least a look -- and these ones are probably a good place to start.

For an excellent look at how to profit from spinoffs, pick up a copy of Joel Greenblatt's classic You Can Be a Stock Market Genius.

Note to the folks at StockPickr: Can you put together a portfolio with all the latest spinoffs? I can't seem to find one...

Spinoffs perform even worse than usual -- Opportunity? originally appeared on BloggingStocks on Fri, 24 Aug 2007 15:10:00 EST. Please see our terms for use of feeds.

Are corporate spinoffs generally a good idea? Sure they are -- they unlock value for the new company and requisite shareholders while "freeing" a hopefully-profitable venture from the auspices of corporate sluggishness. Huge corporate powerhouses can be breeding grounds for "internal companies" that have a great business plan all their own with a product and a margin that is just being buried by the overall company from a product and financial perspective. Why not unleash it separately? That is the thought behind the spinoff, right?

This quote quite piqued my interest when thinking about spinoffs waiting to happen inside big and medium companies right now. Here it is: "Five years from now, Google Inc. (NASDAQ:GOOG)is going to be a great hunting ground for spin-offs." This from Bart Schachter, a partner at Blueprint Ventures. Blueprint's mission is kind of unique: it seeks to break small groups out from large corporations and give them a footing as a startup. These groups, according to Blueprint, generally have 10 to 20 employees and are mainly irrelevant inside their corporate host. It's a classic case of letting the best-performing model prisoner free from his or her shackles.

As companies reach critical mass stage, "things that aren't core to their multibillion-dollar businesses just aren't interesting to them," says Schachter. Is this happening at Google yet? From all indications, it is not. Google is not even a decade old yet but has grown so rapidly that another five years down the road it may be well on its way to what is considered the "bloated corporation". Google's hegemonious culture and "fly by the seat of its pants" operating mentality will probably continue to a point, even as more order in introduced into the company as it grows. In 2012, though, will Google start spinning off small pieces of itself into smaller companies?

Right now, the company still receives almost all its revenue from search advertising, so five years into the future is kind of a clouded view. What will Google's future look like then? Hard to say. But, if the company is grooming several businesses now that end up being spun off in the next few years, we may all soon see just how little this company has grown so far, even in the midst of a $120+ billion market cap.

For an interesting look at Google's acquisition strategy, read my colleague Tom Taulli's piece Google's Wild and Crazy Buyout Team.

Google spinoffs prime VC territory in 5 years? originally appeared on BloggingStocks on Thu, 12 Apr 2007 20:00:00 EST. Please see our terms for use of feeds.

Each year Steven Halpern, editor of TheStockAdvisors.com, surveys the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is part of his 24th annual Top Picks Report.

Kraft Foods (NYSE: KFT) is the top conservative investment for 2007 from Ivan Martchev. The editor of Vital Resources and contributing editor to Personal Finance explains, "Despite having an impressive collection of food brands, Kraft has been a disappointment to investors since it sold shares as an independent company in 2001.

"The IPO price back then was $31; today the shares are in the mid $30s. So why look at Kraft? Altria bought Kraft in 1988 to diversify away from tobacco, as the skies were darkening on tobacco litigation. As the litigation environment is improving, and speculation is that Altria will finally spin off its non-tobacco business -- it owns 276 million Kraft shares -- this should allow it to be fairly valued by the market.

"Some conglomerates suffer from a diversification discount. It's believed that if the parts are separated, the total market value of its stocks together will be higher than the parent company's stock itself. One reason why Kraft has underperformed despite its large portfolio of well-established brands is the pressure from raw materials costs that it couldn't pass on to consumers in the form of higher prices.

"The company recently hired a new CEO, Irene Rosenfeld from Frito-Lay, to come up with a strategy out of this predicament. Since Frito-Lay had excellent financial performance while Rosenfeld was CEO, there is good reason to believe that she is the right person to fix Kraft. With better management and the pending Altria spinoff, Kraft is a buy at current prices."

To see Ivan's top speculative idea for 2007, click here.

Top Picks 2007: Martchev sees spin-off boost Kraft originally appeared on BloggingStocks on Fri, 22 Dec 2006 08:30:00 EST. Please see our terms for use of feeds.