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When it comes to tech investing, there's a strategy that almost always works.
When you can, buy the "spin-off" plays.
You know what I mean.
With a spin-off, even a mature, seemingly humdrum business can create windfall profits for investors savvy enough to capitalize.
Today we're going to do it again. But we're not looking at one of those humdrum businesses.
Instead we're getting a peek at what I think is the single best pick in the "car of the future" space.
We've already made a lot of money with this company.
Two for the Price of One
We last spoke about this company back on March 21.
At the time, we considered this storied auto-supply firm a great stock to own because it's looking at a lot of growth in an unstoppable tech trend.
And I went on to predict that we'd see 30% gains over the next 24 to 28 months.
We're already well on our way.
On May 3, the first-quarter report from Delphi Automotive Plc. (Nasdaq: DLPH) crushed it on profits. Full adjusted operating income was 17% higher than a year ago on 9% higher sales, strongly beating forecasts.
Wall Street saw that report and – in a no-duh move – plowed into the stock. Delphi rose nearly 11% that day.
Even better, volume was 10 times its 50-day average. That's an absolutely key sign that investors now believe in this stock.
But we were there first. (In fact, we first spotted this stock in mid-December – and we've made a whopping 24% gain since.)
And this story just keeps getting better. Not only did the firm beat on earnings, but it also made a savvy move that will further improve shareholder value.
To focus on its growth in driverless and other "car of the future" technology, Delphi is spinning off its powertrain unit in a tax-free move. That division has 20,000 engineers and racked up sales of $4.5 billion in 2016.
The breakup will make it possible for Wall Street to more highly value Delphi's core high-tech unit – which has developed industry-leading artificial intelligence computing platforms, self-driving systems, and anti-collision technologies.
So we're getting a two-for-one here: a winner in the "car of the future" and – with the powertrain spin-off – a stake in the "car of the now." That's okay, because 95% of the world's cars will still run on gasoline through 2025.
And we're going to get that spin-off… for free.
We really like spin-offs here – because they work.
A Lehman Bros. study found that spin-off companies beat the market by 40% in the first two years. And a Penn State University study found a three-year return of 76% – enough to beat the market by 31%.
So, if we just made the norm here, my 30% gain forecast from back in March will come true.
But there's more going on here than just the spin-off – meaning there's now even more money to come our way…
To what I'm talking about, let's travel back two years in time – back to when a Delphi "experiment" made automotive history.
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.