Despite being unwanted and unloved, spinoff stocks are often excellent stocks to buy and hold. Since investors bought shares in the parent company, they are often not interested in the business. This is especially true when they receive shares of the spinoff. They sell the stock, depressing shares.
Other times the parent company will weigh down a spinoff with debt. It makes its balance sheet look better while the newly independent company struggles to pay off its loans.Â
Before BorgWarner (NYSE:BWA) spun off its fuel systems and aftermarket business into Phinia (NYSE:PHIN), it had almost $4.2 billion in long-term debt. After the spinoff, it had about $1 billion less. Phinia, on the other hand, had to take out a new $800 million loan. This was done to make a $450 million payment to BorgWarner.
Phinia isn’t doing too bad though with shares up 49% over the past year. BorgWarner, on the other hand, is down more than 13%.
The three companies below were spun off in the past year. They are performing much like Phinia, doing well on their own. Let’s do a spinoff stock analysis to see if they can keep the momentum going. By the time we are done, you’ll have. a portfolio of a ton of great spinoff stocks.
Spinoff Stocks to Buy: GE HealthCare Technologies (GEHC)
The General Electric company you grew up with and knew is no more. The industrial conglomerate spun off its healthcare equipment operations into GE HealthCare Technologies (NYSE:GEHC) and then completed the company’s dismantling this year by separating into two additional companies: GE Aerospace (NYSE:GE), which kept the GE ticker symbol, and GE Vernova (NYSE:GEV), which assumed the renewable energy utility operations.
Since its separation more than a year ago, GE HealthCare Technologies is up 49% but it is only 4% higher so far in 2024. That is because it suffered a sharp drop after earnings last month, reporting a 1% decline in revenue when Wall Street was expecting growth.Â
Yet investors should still expect good things to come. While there remains excellent prospects for selling more specialized healthcare equipment as a standalone company, a lot of the expectations due to an aging population, greater incidence of chronic disease and the proliferation of minimally-invasive procedures. As GE HealthCare Technologies integrates artificial intelligence and machine learning into its products and services, the industry leader should see an expansion into more healthcare settings.
NCR Atleos (NATL)
NCR Atleos (NYSE:NATL) is the owner of the largest network of surcharge-free independent ATMs in the U.S. It has approximately 83,000 self-service banking terminal locations. It was spun off last October from NCR, which rebranded itself as NCR Voyix (NYSE:VYX) and kept control of the digital commerce business.
Although NCR Atleos is up 35% from its spinoff, it faces an increasingly challenging future. Euromonitor International estimates that after peaking at 471,000 locations in 2019, the number of ATMs has fallen to about 450,000. As mobile and digital payments grow, the ATM industry is in a secular decline.Â
Yet there is also hope for growth. AI, of course, could help preserve the status quo while interactive video teller ATMs (IVTs) are growing. Providing banking customers with enhanced services outside of normal banking hours through IVTs could lead to an increase in ATM locations and usage.
NCR Atleos also has significant exposure to international markets where cash usage is higher. The company generates 55% of its revenue from foreign markets where it has ATM networks in 11 countries and service ATMs in 60 countries. NCR plans to keep investing in growing those networks.
Nextracker (NXT)
A critical component of the solar industry is being able to track the sun across the sky to get maximum efficiency out of a panel. Solar trackers generate 25% to 35% more energy than projects that do not track the sun. That’s what Nextracker (NASDAQ:NXT) provides at utility-scale. It is the world’s largest manufacturer of intelligent tracking systems based on gigawatts (GW) shipped in the U.S. and globally.
Nextracker was spun off from Flex (NASDAQ:FLEX) in January 2023 though the electronics manufacturing company retained a 51% stake in the business. It finally shed the rest of its stake last November.Â
The sun tracker stock is up 26% since gaining its independence. Nextracker issued strong results and guidance that helped push its stock up. Shares jumped 20% after its recent earnings report. Management did offer some caution about pricing pressures but with global expansion opportunities ahead and the possibility for M&A now that it is independent, could see Nextracker stock grow in the future.
On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
