Hurray for Spin-Offs

In general, I like spin-offs and hate mega-mergers: which leads me to smoking stocks and they’ve been smoking lately. Altria (MO) is at a 52-week high and it’s close to an all-time high.
The company spun-off Kraft (KFT) in 2007. Kraft was already publicly traded but MO decided to ditch its remaining 88% in the company. Then in 2008, MO spun-off Philip Morris (PM).
Here’s a look at how they’ve done:

Every stock has beaten the S&P 500 which is the gold line at the bottom. Kraft is the red line, Philip Morris is the blue and Altria is the black.
Mega-mergers sound great. They make a lot of news, but the results are usually pretty unimpressive. Spin-offs, however, can often be good places to find cheap stocks. I should add that after the spin-off, MO was kicked out of the Dow which is another index it has outperformed.

Posted by Eddy Elfenbein on September 10th, 2010 at 11:13 am

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