A Market-Beating Strategy… and the Tickers to Go With It

December 23, 2022

Mickey Mouse is hanging up his cleats.

It’s good news for investors. History shows that folks who make the right moves today will be ahead of the market tomorrow.

The latest rumor from Wall Street is that Disney (DIS) is aiming to spin off a couple of key business segments next year. So far, the whispers have ESPN and ABC on the block.

This comes as no surprise. Shares of Disney have been nearly cut in half this year. Things are so bad, the board had to bring old CEO Bob Iger out of retirement.

Surely he’ll be looking to make some big changes.

Here’s the thing with moves like this: They’re often quite lucrative.

Within Manward’s popular Venture Fortunes research service, I’ve spent the last six months digging deep into the market for deals like this. History shows they are a reliable way to outpace the market.

That’s certainly how things are shaping up for us in Venture Fortunes. We have multiple plays in our model portfolio that were spun off of big companies this year and made public debuts of their own.

Think of a spinoff as a sort of secret weapon for a company with locked-up value.

In the case of Disney, deep-pocketed investors are pushing to spin off some key brands because they believe the flexibility created by such a move would unlock strong growth potential.

Not to dive too deep into Disney’s business model or its woes, but kicking ESPN out of the nest would free the sports network from the ties that currently bind it to Disney’s streaming service. On its own, ESPN would have more flexibility and negotiating power.

We see this sort of thing all across the business landscape.

In Venture Fortunes, we’re doing quite well with a tech sector spinoff. The parent company was a low-growth semiconductor maker, while the “child” was a high-growth, high-tech business focused on the technology of tomorrow.

Managing two corporate entities with vastly different personalities under one umbrella is often inefficient and ineffective.

That’s why wise leaders unlock the value of both businesses by splitting them into two.

In this case, the parent company still owns a majority chunk in the spinoff, but a “demerger” allows both companies to be managed independently.

It’s the same with 3M (MMM). It recently announced it will spin off its healthcare business in 2023… allowing both it and the company’s material science segment to focus on what they do best.

The parent gets the proceeds of the sale and a strong ownership stake in the new venture… while the new venture is free to do what it takes to maximize shareholder value.

Spotting a trend, GSK (GSK), formerly GlaxoSmithKline, recently pushed out its own healthcare group, Haleon. The move will allow the parent to focus on high-growth pharmaceuticals while increasing shareholder value in the slower-paced, consumer-focused spinoff.

Research shows these moves are typically win-win situations. Over the 24 months following a spinoff, both companies tend to outperform the market… often significantly.

In the case of the tech spinoff in Venture Fortunes, we haven’t had to wait nearly that long to see outperformance. We’re up 20% in the past month… with our option position doubling in value. At the same time, the broad stock market is in the red by nearly 4%.

A slew of companies have announced spinoffs that will take place in the next year…

BorgWarner (BWA) will “birth” a fuel systems company.

Vale (VALE) will spin off its nickel mining business.

Novartis (NVS) will send out its generics unit.

And in perhaps the biggest move of all… General Electric (GE) will slice itself in three. That’ll be a deal worth watching. Immense value is on the line.

There are lots of ways to make money in the investing world. Spinoffs – and the value they unlock – are a simple and effective way to put the odds greatly in your favor.