Analysis of 2018 Spinoffs

Resideo Spinoff From Honeywell

Closing price after first day of trading (15 Oct 2018): $29/share

Proprietary Justified Value of the company upon spin (12 Oct 2018): $33.82/share

Resideo from Honeywell

(12 Oct 2018) The Resideo spinoff has several things going for it including a drastic share spinoff differential from one of the largest industrial companies in the world. Resideo and Garrett industries are part of the Honeywell restructuring that was announced in 2017 to streamline Honeywell's operations. An appropriate price for Resideo does not indicate that it will have leverage upon its spin. A downturn in the worldwide economy or the housing market would adversely affect this company. I have set my entry point no higher than $27/share for this likely future household brand name.

Garrett Motion Spinoff From Honeywell

Closing price after first day of trading (2 Oct 2018): $17.00/share

Proprietary Justified Value of the company upon spin (15 Sep 2018): $34.62/share

Garrett from Honeywell

(15 Sep 2018) The Garrett Spinoff has several things going for it including different dividend policies and share counts from its parent. It is highly leveraged and therefore maintains some inherent risk and opportunity. A downturn in the automotive market or the worldwide economy in general would adversely affect this company. Therefore, I will set my entry price below $24/share to provide an adequate margin of safety.

(5 Dec 2018) DISCLOSURE: I purchased GTX at 14.52/share and have two 12.50 PUTs sold at 2.05 each, finally, I have sold one 15 CALL at .90.

KLX Energy from the KLX/Boeing merger

Closing price after first day of trading (18 Sep 2018): $29.42/share

Proprietary Justified Value of the company upon spin (01 Sep 2018): $21.09/share

KLX Energy Services from the KLX/Boeing Merger

(02 Sep 2018) This future oil and gas drilling and producing company may be an opportunity for the individual seeking exposure to the oil and gas industries. Management moves indicate extreme confidence in this new company. Lacking positive cash flows make it a high risk investment. However, current pre-spinoff prices appear to limit the downside potential.

(5 Dec 2018) DISCLOSURE: I purchased KLXE at 25.04/share.

Retail Value Inc

Closing price after first day of trading (29 Jun 2018): $33.01

Proprietary Justified Value of the company upon spin (not assessed): ---/share

Veoneer

Closing price after first day of trading (29 Jun 2018): $42.65

Proprietary Justified Value of the company upon spin (5 Jun 2018 data): 62-79/share

Veoneer to spinoff from Autoliv 29 Jun 2018

(05 Jun 2018) Veoneer will likely be one of the best performers over the next decade. One of the largest companies in the active safety market, this company will likely have a market that doubles or triples over the next five years. As a tier 1 OEM, Veoneer will probably be one of the best companies to own for those interested in participating in the self-driving car market. An appropriate entry point for this company will likely increase overall returns over such a holding period.

(2 Jul 2018) DISCLOSURE: I purchased VNE at 42.95/share.

Spirit MTA

Closing price after first day of trading (31 May 2018): $9.12

Proprietary Justified Value of the company upon spin: 22.50 - 28.25/share (the data from other commercial REITs indicates higher risk)

Spirit MTA to spinoff from Spirit Realty 31 May 2018

(29 May 2018) This new Retail REIT focuses on the operating critical assets for businesses. The company may be an extremely risky purchase but with great potential if it is able to effectively divest its Shopko assets. Valuing this company presented some strange numbers showing how difficult Retail operations were over the past few years. Buyer beware of this company for anything over $10/share until a solid plan for its Shopko assets is presented.

(4 Jun 2018) DISCLOSURE: I purchased SMTA at 9.30/share.

Perspecta

Closing price after first day of trading (31 May 2018): $24.86

Proprietary Justified Value of the company upon spin (10 Jul 2018 data): $28/share

Perspecta spun from DXC 31 May 2018

(11 Jul 2018) The government contractor, Perspecta, features management alignment incentives, discounted price to peers, high leverage, significant core business protection against competitors and remains within the six month investment window out to November of 2018. Interested parties may find that activist investor involvement, the lack of a differentiated market, a significant size difference and dividend policy differences from its parent cause this company to be less attractive than other spinoffs. This company has the added benefit of being a better play against geopolitical upheavals.

Corepoint

Closing price after first day of trading (30 May 2018): $27.89

Market Capitalization end of first day of trading: 1.6 Billion

Proprietary Justified Value of the company upon spin: $22.50/share or less or a market capitalization 1.3 Billion.

Corepoint to spinoff from La Quinta 30 May 2018

(24 May 2018) This new hotel REIT focuses on the business traveler. Corepoint is a spinoff resulting from Wyndham Worldwide's purchase of La Quinta Holding's Franchise business. Management alignment, the likely market interest in Wyndham Worldwide, and a pre-spin valuation likely lower than what the company is actually worth all indicate that purchasing this company post spin may prove profitable.

Apergy

Closing price after first day of trading (09 May 2018): 40.91

Market Capitalization end of first day of trading: $3.2 Billion

Proprietary Justified Value of the company upon spin: $42-53/share or a market capitalization of $3.3-4.0 Billion.

Apergy to spinoff from Dover 9 May 2018

(18 Apr 2018) This future oil and gas drilling and producing company may be an opportunity for the individual seeking exposure to the oil and gas industries. Current market for competitors makes it a high risk investment. However, at the right price, the downside potential is limited with significant upside opportunity.

nVent

Closing price after first full day of regular trading (30 Apr 2018): $22.72

Market Capitalization end of first day of trading: $4.1 Billion

Proprietary Justified Value of the company upon spin: $36-37/share or $7.5 to $7.7 Billion Market Capitalization.

nVent to spinoff from Pentair 30 Apr 2018

(04 Apr 2018) This large-cap separation may present a great investment opportunity. Leadership incentives are in place to align management team actions with investor interests. The announced distribution date is 30 Apr 2018. However, the dynamics of this spinoff may not present out sized returns compared to peers for the investor. Entering at approximately $25/share or less may limit downside while increasing the potential for adequate returns. This is not a domestic US company and may present additional risks to US based investors.

Red Violet

Closing price after first day of trading (27 Mar 2018): $6.20/share

Market Capitalization end of first day of trading: $80.6 Million

Proprietary Justified Value of the company upon spin: $.66 to $1.23/share or $8 to $16 Million Market Capitalization. Note that this capitalization would place the company below the listing requirements for the NASDAQ one of the many reasons this stock is so risky.

Red Violet from Cogint set to occur 26 Mar 2018

(12 Mar 2018) This high risk spinoff is not suitable for most investors. Any money committed to this spinoff will not be backed by a healthy margin of safety at this time. The company's future operations require significant growth over a short period to make this a great investment.

(5 Dec 2018) I purchased RDVT at an average price of 7.00/share after they demonstrated nearly 80% sales revenue increase.

(26 Mar 2019) Unfortunately, I sold RDVT too soon at a loss of about 8%. In May 2019, the price of RDVT shares jumped to over $13/share, a decent exit price. Lesson learned: commit to at least one year for a trade.

Raphael Holdings

Closing price after first day of trading (27 Mar 2018): $4.90/share

Market Capitalization end of first day of trading: $57.0 Million

Proprietary Justified Value of the company upon spin: $.52 to $1.03/share or $6 to $12 Million Market Capitalization.

Rafael Holdings from IDT on 26 Mar 2018

(01 Apr 2018) This spinoff could allow the investor to get in on the ground floor in a company that may one day cure cancer. The opportunity is supported by a Real Estate business that will help generate cash as the company's drugs go through clinical trials. The CEO is experienced in creating valuable spinoffs from his original company IDT. Although it lacks cash flow, this unique play on the pharmaceutical investment company shows the CEO knows how to limit risk in a business in which he may lack experience.