David Clayton-Thomas of Blood, Sweat & Tears did not have much of a reputation as a stock picker, but in his oft-covered song, “Spinning Wheel,” he gives us a clue of an area most investors are ignoring right now.
Corporate spin-offs are back in vogue, and we have seen some major separations that have yet to receive a lot of press as we all focus on inflation, global wars, and artificial intelligence. (And as we all know, it makes far more sense to chase short-term trading systems every day than paying attention to actual corporate events and valuations.)
Today, I want to highlight two spin-offs that have happened this year. Both own a collection of consumer brands that are in almost every home in America. And shareholders of their parent companies have dumped both stocks.
Let’s take a look…
Back in May, Johnson & Johnson (JNJ) decided to split the company into two separate businesses. The parent company, good old JNJ, kept the prescription drug and healthcare business.
The consumer business, consisting of all the skin care, beauty products, and over-the-counter products, was spun off into a new company called Kenvue (KVUE).
Johnson & Johnson sold 10% of the company in an IPO back in May for $22 a share.
The stock traded as high as $27.50. In August, JNJ conducted an exchange offer that lowered its ownership of Kenvue to less than 10%, and currently, the stock is trading under $20.
This is a collection of brands that you and I both buy all the time—I have used one Kenvue product already today. I know for a fact that both of my adult kids and one granddaughter have used one of their products this morning. I have gone out in sweatpants in the middle of the night to purchase this company’s products. A substantial portion of the various creams and concoctions in my wife’s drawer of things I do not understand come from Kenvue.
The brands owned by Kenvue include Tylenol, Zyrtec, Bandaids, and Listerine. Sudafed, Motrin, and Benadryl are also Kenvue products.
Most politicians are in dire need of Kenvue products like Imodium, Microlax, and Motilium. Their constituents could probably use Pepcid.
This company is to the bathroom medicine cabinets what Proctor and Gamble (PG) are to the cleaning supply cabinet under the sink. I am not describing each of its drugs or products in this article. That would be like telling people in Arizona what sunshine is, or explaining rain to Seattle residents.
There is a cloud surrounding Kenvue stock, as a lawsuit alleging that…
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