The Watchlist: 3 Stock Spinoffs Coming Soon (Be Ready to Buy)

  • Spinoffs can either be weighed down with baggage or allowed to soar out of the gate. These three spinoff stocks to buy are the latter.
  • Illumina (ILMN): The DNA-testing outfit will be spinning off its cancer testing Grail unit that it only acquired three years ago.
  • Jacobs Solutions (J): The business consultant will spin off critical government-services operations and merge it with privately held Armentum.
  • DuPont (DD): This is a three-for-one spinoff as the industrial conglomerate is breaking itself up into three distinct businesses.
Stock Spinoffs to Buy - The Watchlist: 3 Stock Spinoffs Coming Soon (Be Ready to Buy)

Source: Faizal Ramli/Shutterstock.com

Stock spinoffs to buy can be tricky finds. They represent opportunities to cash in on a business that oftentimes gets lost in the shuffle of competing for resources with other corporate initiatives. Going solo gives it the chance to dedicate resources to its own mission and grow.

Yet risks abound. Many times the parent company will offload debt and other obligations onto the spinoff. So not only does the new spinoff stock have to contend with all the issues of being a public company responsible for its own fate but it is saddled with its parent’s baggage too.

Below are three stock spinoffs to buy that are set to occur within the next two years. Let’s take a closer look and see why you should be ready to jump in when they begin trading.  

Illumina (ILMN)

Illumina (ILMN) logo displayed on reddish stone facade building against blue sky background
Source: shutterstock.com/JHVEPhoto

Genetic testing specialist Illumina (NASDAQ:ILMN) will be spinning off its cancer testing unit Grail just three years after buying the company in a contentious acquisition battle with antitrust regulators. It defied Federal Trade Commission (FTC) opposition and when the agency sued, Illumina won on appeal that required the FTC to reconsider the deal.

However, billionaire activist investor Carl Icahn sued Illumina’s board saying it violated its “fiduciary duties” in making the acquisition.

Illumina apparently decided the headache was not worth it and began the process of preparing for a separation either through a sale or spinoff. It finally settled on the latter and Grail will trade on the Nasdaq exchange under the symbol GRAL. Illumina shareholders will receive one share of Grail for every six shares of Illumina they own as of June 13. Grail stock will fully begin trading on the Nasdaq on June 25.

Grail’s early cancer test Galleri holds a lot of promise. It can detect 50 different kinds of cancer early in the process. Early detection is one of the best hopes of beating cancer. Grail is trialing the test with the U.K.’s National Health Service and 140,000 participants. It is expected to be completed by the third quarter. Results from its Pathfinder 2 study are expected in 2025 and Grail anticipates filing for approval from the Food & Drug Administration in the first half of 2026. 

It’s understandable why Illumina wanted Grail so badly and indicates why you might want to be on top of it when shares become available.

Jacobs Solutions (J)

Gold shield; digital shield, defense, protection
Source: anttoniart / Shutterstock

Jacobs Solutions (NYSE:J) is a U.S.-based provider of consulting, technical, scientific and project delivery services for the government and private sector. Last November it announced plans to spinoff its critical mission solutions division along with its cyber and intelligence services business.

It plans to combine those two companies with Amentum, a privately held government services business that itself was spun off from AECOM (NYSE:ACM) in 2020. The new business will be an independent publicly-traded government services pure-play with around $13 billion in annual revenue. A large majority of the spinoff’s future EBITDA is expected to come from higher growth, higher margin sectors including intelligence, cyber, energy and digital engineering. In particular, Amentum will have long-term, large-scale Defense Dept. contracts.

We’ve seen with companies like Palantir Technologies (NASDAQ:PLTR) that providing such mission critical capabilities to the government can lead to enormous growth potential. And like Palantir, it wouldn’t be surprising to see the new combined Amentum ultimately pursue commercial contracts for additional expansion opportunities.

DuPont (DD)

The logo for DuPont (DD).
Source: ricochet64 / Shutterstock.com

Investors are getting a three-fer with DuPont (NYSE:DD). The industrial giant announced last month it is breaking itself up into three separate, publicly-traded businesses. The legacy business will remain a premier diversified industrial company. Meanwhile its water and electronics businesses will be spun off into new separate entities.

The new DuPont will maintain its presence in healthcare with applications for biopharma consumables, medical devices and medical packaging. It will also offer mobility components for electric vehicles while also serving safety, construction, aerospace and other industrial-based end-markets. Diversification is still central at DuPont.

The electronics company, though, will be a leading global provider of electronics materials including consumables used in semiconductor chip manufacturing. These businesses generated sales of approximately $4 billion in 2023, resulting in operating EBITDA margin of approximately 29%.

The water business will be a leading provider of water filtration technologies for industrial, commercial and residential applications. The business had sales of approximately $1.5 billion and 24% operating EBITDA margins last year.

With semiconductor demand being what it is, that business will be first out of the gate in growth. The other two seem more stable, steady-growth operations. DuPont expects the separation to be completed sometime over the next 18 to 24 months.

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.

Rich Duprey has written about stocks and investing for the past 20 years. His articles have appeared on Nasdaq.com, The Motley Fool, and Yahoo! Finance, and he has been referenced by U.S. and international publications, including MarketWatch, Financial Times, Forbes, Fast Company, USA Today, Milwaukee Journal Sentinel, Cheddar News, The Boston Globe, L’Express, and numerous other news outlets.


Article printed from InvestorPlace Media, https://investorplace.com/2024/06/the-watchlist-3-stock-spinoffs-coming-soon-be-ready-to-buy/.

©2024 InvestorPlace Media, LLC