The Investing for Beginners Podcast - Your Path to Financial Freedom · By Andrew Sather, Stephen Morris, and Evan Raidt | Stock Market Guide to Buying Stocks

The Hidden Goldmine of Stock Spinoffs with Rich Howe

·42 min·2 clips

Thungela Resources traded at about two times free cash flow and was set for a 25% dividend yield.

1. The Investing for Beginners Podcast episode centers on Rich Howe and stock spinoffs as a way to find value in public markets. 2. Andrew Sather and Dave Ahearn host Rich Howe, who founded Stock Spinoff Investing and tracks spinoff opportunities. 3. The episode asks what a spinoff is, why companies separate businesses, and why investors care about the setup. 4. Rich Howe defines a spinoff as a public company breaking into two or more public companies. 5. He says Wall Street prefers simplicity because conglomerates are harder to value than pure plays. 6. He argues that separated businesses can be assigned a higher combined value than the original parent company. 7. Western Digital becomes the main example because it split its NAND flash business from its hard-drive business. 8. Rich Howe compares the remaining Western Digital hard-drive company with Seagate Technologies, which he describes as a pure-play hard-drive company. 9. He says investors expected the remaining company to trade closer to Seagate’s multiple than the parent’s lower multiple. 10. He estimates that U.S. markets usually see about 10 to 15 sizable spinoffs per year. 11. He says micro-cap spinoffs can be poor quality and mentions themes like cryptocurrency and marijuana names. 12. Rich Howe says he likes to prepare before a spinoff happens so he can buy after selling pressure hits the market. 13. He also likes situations where a business is being “sold indiscriminately” even when he believes it is attractive. 14. Rich Howe credits Joel Greenblatt’s book You Can Be a Stock Market Genius for shaping his interest in spinoffs. 15. He says the biggest chapter in that book is on spinoffs, and he read it about 20 years ago. 16. He warns that not every spinoff works because some are over-levered or contain bad divisions. 17. Thungela Resources is his clearest success example, and he says it was spun off from Anglo American in South Africa. 18. He says Thungela had no debt, traded at about two times free cash flow, and was set to pay out 25% of cash flow as a dividend. 19. The tone is practical and conversational, with Andrew Sather and Dave Ahearn asking follow-up questions throughout the interview. 20. Value investors and spinoff hunters will get the most from this episode, while listeners wanting broad market news may skip it.

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