Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (7) | Ignore Thread Prev | Next
Author: lwitches Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 120  
Subject: Hanesbrand Date: 8/2/2006 6:17 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
For Greenblatt fans here is a classic spinoff coming up

http://charlotte.bizjournals.com/triad/stories/2006/07/31/daily20.html

I will try to post follow-ups to see in we can do a Greenblatt spinoff analysis on the separation. Is anyone interested?

A brief extract from Greenblatt explains why spinoffs are attractive...

"There are plenty of reasons why a company might chose to unload or otherwise separate itself from the fortunes of the business to be spun off. There is only one reason to pay attention when they do : you can make a pile of money investing in spinoffs. The facts are overwhelming:. Stocks of spinoff companies, and even shares of the parent companies that do the spinoffs, significantly and consistently outperform the market averages."

"The spinoff process is a fundamentally inefficent method of distributing stock to the wrong people. Generally, the new spinoff stock isn't sold, it's given to the shareholders who, for the most part, were investing in the parent company's business. Therefore once the spinoff's shares are distributed to the parent company's shareholders, they are typically sold immediately without regard to price or fundamental value"

It is interesting to note two points with the Hanesbrand spinoff

(1) It has well-known brands that produce stable cashflows.
(2) It is been loaded with $2.6Bn of debt.

Greenblatt notes that highly leveraged businesses can produce spectacular earnings growth. Does anyone have any insights in how this may play out for Hanesbrand?

"The ratings reflect Hanesbrands' high leverage resulting from its all debt-financed dividend to Sara Lee, the commodity-like nature of some of its products, the highly competitive and promotional retail environment, and its relatively narrow business focus," S&P analyst Susan H. Ding said in a news release.

Does this indicate that Hanesbrand is the toxic waste? ( see GBs writeup of Marriot case study for the explanation of "toxic waste"). Who is going to want to own a commodity-like business loaded with junk status debt?
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (7) | Ignore Thread Prev | Next

Announcements

Post of the Day:
Macro Economics

U.S. Stable, Europe Stalling
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement