Holding Stocks You Would Not Buy

One of the mistakes that I frequently make, and I am working to fix, is that I tend to only analyze assets as they are at the moment rather than taking into account what they will be–specifically, the invisible aspect of a corporation’s deal-making potential.

You may remember earlier this summer when I voiced disagreement with the professional analysts covering Anheuser-Busch that were projecting 9% annual growth at the giant brewmaker. I looked at the amount of costs already wrung out of the company, saw the anemic revenue growth, and figured there was no way earnings could grow at a rate of 9%.

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How Many General Electric Shares Should You Exchange For Synchrony Financial?

The reason why stock split-offs are generally unpopular with investors is that it requires the measurement of figuring out how much of a company you’re familiar with (the parent company) to exchange for a company that is relatively unknown. And because stock split-offs usually occur in prosperous economies, you tend to receive a misleading set of figures–the truly long-term investors want to know how a company performs in the worst of times, and that information is not usually available at the time you have to make your decision.

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How Does The General Electric-Synchrony Exchange Work?

Stock spinoffs are one of my favorite corporate events. If you are a shareholder of a company that is undergoing some kind of divestment, it is usually wise to pay attention. It is almost certain that the spun-off company has a different growth profile, earnings quality, and overall debt picture than the parent. Sometimes, a spinoff is done to pass off liability–like when Arch Coal and Peabody Energy shed assets to create Patriot Coal which was destined for immediate bankruptcy (a matter that is still being litigated to this day.)

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