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Be Ready When This Tech Spin-Off Hits Wall Street

Most investors don't think of Rayonier Inc. (NYSE: RYN) as a high-tech firm.

This 85-year-old forest products company operates as a Real Estate Investment Trust (REIT) after being first acquired, then later spun off, by ITT Corp. (NYSE: ITT).

It owns some 2.7 million acres of timberland and is one of the largest landowners in the U.S. and New Zealand.

That sounds like a pretty low-tech operation – turning forest lands into lumber, pulp, and paper products.

And there's our opportunity…

Hidden below the surface is a tech-oriented performance fiber division that can offer investors superior returns and is soon to be spun off.

While that deal's developing, I'll show you first why it's going to be a huge winner.

And then how to profit now from some of the best tech spin-offs out there…

Beat the S&P 500… By Nearly Half

Rayonier's yet-to-be named spin-off will make products for the pharmaceutical industry as well as specialty coatings used throughout the tech and industrial sectors.

More to the point, the fiber unit transforms simple wood chips into high-value cellulose fibers used in the manufacture of flat panel televisions, computer screens, and smartphones.

Rayonier has found a way to unlock the division's hidden value when it made the decision to spin off the fiber division as its own independent company.

The structure of this spin-off shows just why these transactions can be so profitable for investors.

Rayonier's existing shareholders will get stock in the new independent firm at no cost to them. In other words, buy one stock and invest in another one for free – all without a bill from the tax collectors.

And history shows that's just the beginning of the profit stream…

Lehman Bros. studied the subject extensively and found that investors in these kinds of deal gain windfall profits. The former Wall Street giant studied 85 spin-offs between 2000 and 2005 and found that they beat the S&P 500 by as much as 45% in their first two years as independent companies.

Of course, some may think that's a biased study designed to attract investors to new issues the firm is underwriting. But academics have come to similar conclusions.

Consider that two professors at Penn State University examined 30 years of market data covering 174 spin-offs. Their study revealed that in the first three years of operations, these new companies showed price appreciations of 76%, beating the S&P 500 by 31%.

Whether the teams from Lehman Bros. or Penn State have the best profit data is beside the point. Both studies prove conclusively that spin-offs can absolutely crush the overall market's returns.

Spin-Offs: The Ultimate "Two for One" Deal

Now then, as much as we like the potential in the Raytheon spin-off, there's a play that gives investors the opportunity to invest in more than 30 of the best spin-offs.

The Guggenheim Spin-Off ETF (NYSE Arca: CSD) specializes in just these kinds of deals. Strictly speaking, it's not only focused on technology firms.

Instead, CSD invests in technology as well as a broad array of sectors such as energy, restaurants, and entertainment.

But it includes three spin-off firms in particular that will help this ETF well outperform the overall market's returns.

Join the conversation. Click here to jump to comments…

About the Author

Michael A. Robinson is one of the top financial analysts working today. His book "Overdrawn: The Bailout of American Savings" was a prescient look at the anatomy of the nation's S&L crisis, long before the word "bailout" became part of our daily lexicon. He's a Pulitzer Prize-nominated writer and reporter, lauded by the Columbia Journalism Review for his aggressive style. His 30-year track record as a leading tech analyst has garnered him rave reviews, too. Today he is the editor of the monthly tech investing newsletter Nova-X Report as well as Radical Technology Profits, where he covers truly radical technologies – ones that have the power to sweep across the globe and change the very fabric of our lives – and profit opportunities they give rise to. He also explores "what's next" in the tech investing world at Strategic Tech Investor.

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  1. Jay Trees | February 5, 2014

    Regarding RYN,
    Why do you think this has great up side when the CEO reduced his holdings by 21% on 1.14.14?
    If he thinks its so good,why would he sell?

  2. Fran Donohue | February 6, 2014

    what is the name of the company with the mems technology

  3. robert mcelroy | February 9, 2014

    what is the name of the company that holds the,or most patents on MEMS technology that all the other companies will at some point have to do business with?

    • dennis | February 11, 2014

      hi Robert- subscribe 2 the service like the rest of us had 2 and you'll know. have a good day!

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