There’s a small sector with a lot of value that few people are paying attention to spinoffs.
First-time guest Richard Howe of Stock Spin-Off
I have a lot of long-term visions for Curzio Research. In today’s educational segment, I give you a glimpse into our future—including new products we’re launching very soon [50:27].
- Rant: Surgery update [04:00]
- Guest: Richard Howe of Stock Spin-Off Investing [11:43]
- Educational Segment: What’s new at Curzio Research [50:27]
Wall Street Unplugged | 689
How to invest in spinoffs
Announcer: Wall Street Unplugged looks beyond the regular headlines heard on mainstream financial media to bring you unscripted interviews and breaking commentary direct from Wall Street right to you on Main Street.
Frank Curzio: What’s going on out there? It’s October 2nd, I’m Frank Curzio, host of the Wall Street Unplugged podcast, where I break down the headlines and tell you what’s really moving these markets. I have to start off with this shout out to my daughter. Preface, student council president, had an amazing speech, went on stage and podium in front of hundreds of students. I have to tell you, she’s better at speaking on stage than me already, which is really cool.
And it came down to three candidates, which was my daughter, Brianna, another girl that was really, really nice, and this other girl that, you know, just had a little friction between my daughter and this girl. So, she was very competitive. Brianna wanted to win this thing. And yeah, when people who know me best say that I’m the most competitive person they ever met.
I guess it comes up from growing in a tough neighborhood where I was the fat kid and people made fun of me, even my close friends. And to be fair, I made fun of them as well. That’s what I was like, growing up in Queens, New York, it was tough. But for me, I always used that as motivation to make sure that anyone who ever make fun of me, that I would beat them in anything for the rest of their lives. Every sport we played, every video game we played, no matter what it was everything.
And if someone always told me something can’t be done, there’s no way you could do it, forget it. I mean, it’s like ultimate motivation. The bull seeing red. Now I need to prove them wrong, but I made sure I was the best at it. That’s how competitive I was. There’s a positives and a negatives to being that way. Some people go, “Oh, that’s pretty cool.” Again, it’s being competitive is a really good thing, but when you’re overly competitive, sometimes it gets a little crazy.
Anyway, my daughter, when it comes to being competitive is a hundred times worse than me. A hundred times worse than me. I mean, she hates losing. She hates losing more than she likes winning. She’ll win at something and be like, “Oh, that’s cool.” She loses, she’s like getting mad and going… Which, I like. Which is really cool. I liked the competitive nature in that. Then so when I look at her, the only student council running, and this is the third year that she did this, so it’s a third year. She didn’t get elected the last two years. She really busted her butt and now this year she wound up being elected student council president of her school. So she actually won, which is really cool, and just really proud of her.
I’m pretty sure that she won easily. Maybe just maybe that was due to my wife, who had this big bright shirt on that says, “Vote for Briana,” and then she gave out like a hundred cupcakes to kids. I mean, not saying that was a deciding factor, I don’t know about you, but if I was 11 years old and somebody gave me a big cupcake, I’d probably do whatever they want at that age, which is really cool.
But I’m just really proud of her because, I don’t know, when you’re a kid, especially these days, I mean, no one wants to see them fail. Everybody gets a trophy, you know, it’s always like, “Oh no, it’ll be okay.” And that’s not the real world. That’s not the way I grew up. A lot of you didn’t grow up who’s in their 40s and 50s now, but it’s different when you have kids. It’s like you can’t disappoint them. They can’t have failure. And the fact that two years running, she was really disappointed. She’s competitive to really go at it even harder this year in win. Yeah, that’s really, really cool, and I just want to give a shout out.
Also, I wanted to thank you, so many of you, who sent me emails, said some kind words. I had my hip replaced last week. Kind of a crazy surgery, very high success rate, but you really need to watch a YouTube video on this. It’s really… First, they have to dislocate your hip, which is very, very hard to do. Very hard to dissipate a hip. Now, they take out the existing hip joint, which they did for me. They clean out all the garbage and the bad stuff. They put like a new socket into your pelvis and then they placed a ball part into the socket, which locks in. That’s okay.
And when I first looked at this film, I’m like, “Yeah, that’s pretty cool.” I didn’t really understand the whole process of what comes next because that seemed pretty straight forward. But attached to the ball is this metal shaft. So think of it like a shaft as a giant spike, a giant metal spike that needs to be hammered. It’s kind of like it’s a spike, almost like if you’re pitching a tent. This spike needs to be hammered into your thigh bone, and it’s like a foot long. It’s insane. And it’s funny because now I noticed even before I was like, but now that I feel it, it’s not the incision, which is huge by the way, 12 centimeters, it’s below that where they really pound that thing in there. And that’s why it takes a long time, a couple of months to really get this thing tight to where you’re not limping anymore and stuff. But it’s pretty hardcore. I mean, definitely watch a YouTube on it. It’s going to blow your mind.
But I did say earlier that I was a fat kid, and God blessed me with being fat and also being very fast. So fast enough to cover the top point guards in some of the best leagues in New York City, which was really cool at the time, but that’s why at 47 years old, I was carrying around extra 20, 25 pounds, running around like a maniac faster than everybody else, and it’s not often you see at this age people get hip replacement surgery.
So, just to let you guys know, I wanted to give you the update. I’m still getting lots of emails. Surgery was a complete success. I was walking the same day, actually driving to work three days later. I mean, keep in mind, people are like, “Wow, that’s crazy.” It’s like, yeah, I was in a lot of pain pre-surgery for at least the past few years, so the pain I’m feeling now post-surgery is actually less. Which just being able to walk around, drive, do lots of things. Plus this surgery is usually performed on people who are older.
In fact, when I asked my doc, “How long is this thing gonna last?” She said, “Well, Frank, we really don’t know because we only really do these on people who are over 60.” I was like, “Oh, thanks a lot doc.” But since I’m just under 50, the healing process is much quicker, which is good, and if I had to guess, it’s going to last longer than 20 years. I’m going to be very careful. I don’t know if I’m going to go back and play basketball. Have to be a little smart because I did have a couple of back surgeries, which the back is absolutely fine. They put a new disc in there.
Kind of feel like the bionic man right now, but all is good. I feel great. Probably take three to four weeks if I’m not limping anymore. You have a nice scar, which you guys really need to see. It is 12-centimeter incision on my thigh, and it’s really cool. I think it’s cool anyway. And you know what? I wasn’t going to, like I only showed a couple of people because it’s really like gory and gross. Again, I think it’s cool. Maybe you don’t.
But you know what? I’m going to post it on Twitter. So, if you are on Twitter @FrankCurzio, I know a lot of you guys already follow me, but this podcast is going to publish before 6:00 PM usually, and again, this is Wednesday today. So at 8:00 PM, give me a second, I’m doing this actually right now, putting it on my calendar. I’m going to post a picture of it on my Twitter account so you can see this huge incision, Frankenstein-like, that is kind of amazing. Again, I think it’s cool. If you don’t think it’s cool, then don’t even go to see it, but if you want, I’ll post it on Twitter. It’s really, really cool.
Definitely, definitely worth seeing, I think. I mean it’s, unfortunately, you’re going to have to see my thigh. It’s just not too sexy. But I’ve never seen something like this before. That’s why I want to post it. I mean, I’ve seen a lot of these with friends that have surgeries. This is nothing. My back surgery, little incisions. This thing is like they slice your whole leg open and yeah, it’s really, really cool. Especially right now since it’s all black and blue and stuff. So I’ll definitely post that for you @FrankCurzio on my Twitter account if you’re interested in seeing it, and I’m going to do it exactly at 8:00. I just set my calendar for it just for you guys.
So once again, thanks for all emails. You know I love you guys, and you know it’s true how? Because even though I had a major surgery, I didn’t miss a podcast. Got everything out on schedule, even my newsletters, because I’m a badass, and I’m great, and I’m awesome. No, it has nothing to do with that. In all serious, I couldn’t do without the help of my amazing team and getting a little serious with you here, it’s never easy running your own business. I know a lot of you out there are business owners and you have lots of employees.
You always have things that need to be taken care of. There’s always something to do. It’s never like, “Hey, you could take a week off.” No, it’s really crazy. But when you have an amazing team where you all have each other’s back, and it’s not about me, me, me, it’s pretty awesome. And it’s also a very powerful, especially at this stage in our company where we have lots of growth potential, a lot of growth initiatives in place that you’re going to start seeing firsthand starting this month, and I’m gonna break down a lot of those later on the show, including seven new product launches.
But I just want to say thanks to my team for having my back. They really worked their asses off over the past two weeks and now I’m back in the saddle. Things are cool. Way to go. And I have a great interview set up for you, new guests and this, the power of networking. I always tell you guys, well, people ask, “But you do a free podcast. Why do a free,” the networking and the amount of people you have that I’m interviewing, it’s kind of amazing because Chris Mayer, who you guys know, good friend, I’ve interviewed numerous times on this podcast, someone who I respect very much. He’s an amazing, amazing analyst.
But Chris reached out to me and said, “Hey, Frank, I have this guy. He’s a good friend. He’s very, very smart. I think it’d be a good idea to have him on your podcast.” And coming from Chris, I mean, that’s a big deal. So right away I was very interested. This person’s name is Rich Howe. So Rich, works in the private equity sector. His mom was a junk bond analyst at PIMCO, while his dad was a large-cap equity portfolio manager. So I love this story because it’s similar to mine. He’s a junkie. He’s been in this market forever. And Rich has been drawn to one particular segment of the market where he’s been seeing amazing returns. And that segment is spin-offs.
So, if you’re a subscriber to any of my newsletters, you’ve seen me recommend several spin-offs. It’s just companies spun out, divested from their parent companies, and they’re spun out because they might not have… It’s like a non-core asset. Maybe like a gold company spinning out a uranium project that they may have acquired by purchasing another large gold company. Maybe they just had the uranium project on the books and now they have it.
You have a gold management team that really doesn’t focus on it. So they’re like, “Okay, you know what? This uranium project has tremendous potential. We think the next five years the uranium prices are going to go higher. Let’s spin it off and get a particular management team that knows what they’re doing to really focus on that.” A lot of companies do that. And if you want a better example, I mean, you could look at GE as well, right? I mean, spin-off different divisions where they could focus on some of the things that they’re doing well and maybe healthcare or aviation.
But it’s really an amazing market, and it’s cool for several reasons, which Richard’s about to tell you. So, now spin-offs outperformed the market, but they don’t show up on a lot of screens for months. Institutionalized won’t even share coverage on them for at least a month. They’re allowed to. So a lot of these are under the radar, which by the way, hedge fund managers love investing in it, just look at 13Fs. Anyway, I just want to give you a quick prep.
Richard’s going to break down spin-offs, how to find them, how to invest in the right ones through his model. We’re going to cover his methodology, which I always love doing with my guests. And of course he’s going to share some amazing ideas with us. You guys pay close attention because Rich basically is one the only analyst I know that has a newsletter totally dedicated to researching spin-offs, which is really cool. You know what? Let’s get to that interview right now. Richard Howe, thanks so much for joining us on the podcast.
Richard Howe: Hey, Frank. Thanks so much for having me. This is an honor. Really, really appreciate it. Looking forward to this conversation.
Frank Curzio: Well, you know, a mutual reached out and said, “Hey, you know what? You’ve got to talk to this guy. He’s great. He has his own new newsletter,” and that’s Chris Mayer. So, what I usually do with first-time guests like yourself is tell the audience a little bit about yourself. How long you’ve been in this industry. I know because I always do a ton of research on everybody that I interview, and I love the background because it’s kind of similar to mine. I’ll let you tell it. Why don’t you go ahead?
Richard Howe: Yeah, yeah, great. Well, so, yeah, similar to you, I’ve always been interested in stock. So ever since growing up, I was that kid who joined the investment club in high school and in college and it was always had a little investment account where I was trading stocks in my PA, making a little money. Making some mistakes as well. The benefit, the cool thing was that both my parents were in the industry. So, my dad, I lived, or I grew up, just south of Boston in a town called Milton. And my dad worked in Boston as a large-cap portfolio manager, so I could always just bounce questions off him, which was awesome.
And then my mom she was a bond analyst for PIMCO actually part-time. She worked from home actually. So I was able to really dig in to any questions that I had, kind of asked them the dumb kind of repetitive questions again and again, but it was super helpful.
And then, I went to college around here at Trinity College, a school in Connecticut, a little liberal arts school. But I knew that I wanted to get in the investment business right out of school. And so I was able to get a job in the equity research department at Eaton Vance as an associate. So, helping out a bunch of senior analysts, analyze different sectors. It was a great way to start my career. I got to look at a bunch of different sectors. I completed the CFA training program, got my charter, which was great.
And then I eventually switch gears and switch to City Private Bank, and instead of doing public equity research, I was doing private equity research. So I stayed there for about five years. And then more recently I’ve switched gears and focused full-time on just looking at spin-offs as I’m sure we’ll get into. But, I left City in 2018 and decided to focus full-time on just covering the stock spin-off market. It’s been a passion of mine, so I was super excited to make that move.
Frank Curzio: So, I’m looking at stock spin-offs. I mean, it’s a niche area of the market that not too many people cover. Let’s talk about that because I recommend spin-offs in my newsletters. It’s an area that, as soon as these companies are spun off, you’re not going to see a lot of coverage on them right away. I feel like they’re under the radar, but I also see, if you look at 13Fs where hedge funds jump all over these.
Why don’t you talk a little bit about, why this particular market? Because I don’t know anyone who just covers spin-offs, but doing the research and everything, I could see why based on the returns, but one could talk about spin-offs and let’s give people, the audience, a quick view of exactly what this is and why it’s so important that they should learn a lot about it.
Richard Howe: Totally, totally. Yeah, so spin-off is pretty simple. So it’s basically when a publicly-traded company breaks up into two or more publicly traded companies. So an example that I always give is last year there was a company called Dover, which had four different divisions. It was a conglomerate focused on industrials. One of those divisions was an energy services company. And so Dover decided to spin-off that energy services company because energy results are a little bit more volatile than some of their other divisions.
And so investors had encouraged them to spin-off the energy company so that their results would be a little bit more stable. And so if you had owned Dover, call it a hundred shares of Dover before that IPO, the next day, once the spin-off was complete, you’d still own those a hundred shares of Dover, but you’d also own 50 shares of the energy services spin-off called Apergy.
So that’s basically what a spin-off is. It’s basically when a publicly-traded company just breaks up into two or more publicly traded companies. The reason why I know it’s definitely a little bit of a narrow niche. I really got into spin-offs when I read Joel Greenblatt’s You Can Be a Stock Market Genius. I don’t know if you’ve heard of that book or read it, but they spend a lot of time focused on spin-offs, and Joel pretty much covers that spin-offs, you can look back, 10, 15, 20, 30, 40 years even and spin-offs have outperformed the market. So they tend to do very, very well, and generally beat the market, whether it’s the S&P 500 or a European index they tend to do quite well. So, that was the main reason why I thought they were so interesting.
And then another cool aspect about spin-offs as you know is a lot of the time they are under the radar. And so, a big company will spin-off a small little division into it, an independent publicly-traded company, and there will be a lot of indiscriminate selling. So the owners of the large parent who are, have a mandate to maybe invest in larger-cap stocks really won’t have an interest or really a mandate in keeping the small-cap spin-off that they’ve just received. And so oftentimes, right when a spin-off is spun off, you see indiscriminate selling just waves of selling pressure.
And the other cool thing is that, as we all know, there’s the rise of index funds and ETFs that track these index funds or track the indexes. Those also own these parent companies that are spinning off their divisions. So the cool thing about spin-offs is that they publish all their financials well ahead of time on a pro forma basis, so you can get in there and do the research, figure out if it’s a spin-off that you’d like. I mean, not all spin-offs are going to be good opportunities, but if you find a spin-off that you think is interesting and then you can just watch its initial trading and oftentimes you’ll see spin-offs sell-off by, call it 20, 30, 40, 50%, and you can get in at a really attractive price. So, I’ve always been excited by market inefficiencies and really kind of niche-y little, little opportunities. And so that’s really the big reason why I find spin-offs so interesting.
Frank Curzio: Now, not only that, could you talk about it from a prospective way? Let’s get deeper in it. Where now that they spun off these divisions, and I could see a lot of people say, “Well, they’re just doing that for the money,” or, “Some shareholders want that,” and you’re not getting the value. But when you really look under the hood, one is when they’re going to spin-off, they’re going to have a pretty solid balance sheet, right? It’s almost like an IPO type thing, and it makes them a pure-play. So sometimes it’s much better than the parent where you could have a, I use an example earlier about if a gold company could have acquired another big project, a uranium component attached to it.
And that’s kind of non-core, and they could spin that off. But even the management team is so used to being focused on gold where they’re not focused on the uranium project that exists in the hypothetical example where now you can get an a team that knows Uranium and knows. I mean, just talk a little bit about those because I feel like that’s not really talked about with spin-offs where people get in and say, “Well, these new companies are spun off. It’s a new company,” but the reason why these things do so great, when I talk about performance, is a lot of these little details, right?
Richard Howe: Exactly right. Yeah. So, yeah, no, that’s a huge point. I don’t know if you’ve ever worked at a big company, but I worked, I have spent some of my time at a large investment bank and it’s a very bureaucratic institution and it’s that way because it has to be. There are over 200,000 people working for the bank, and there has to be the level of management the level of bureaucracy to ensure that the right things are getting done. But it’s the same way in some of these parent companies that are spinning off their divisions. So it could be, and I’ll just give one example because it’s always helpful to use examples.
Honeywell is a big company that’s focused. It’s a conglomerate. It’s focused on a bunch of different areas, but its primary focus is on the aerospace market. Investors that invest in Honeywell probably invest in Honeywell because it has exposure to the aerospace market, which has a lot of secular tailwinds that are benefiting it.
Last fall they spun off a division called Garrett motion, which was just focused on turbocharges, so just the turbocharger market. This turbocharger company used to be buried within the conglomerate structure of Honeywell. They used to get no love whatsoever. They had to beg for any sort of capital investment.
But then there’re spun off from Honeywell, and they’re able to really decide, how to allocate their own capital. What kind of growth opportunities they want to pursue. They don’t have to go through multiple layers of approvals to get their projects approved. And so it cuts out a layer of bureaucracy and allows the operational performance to improve with the spin-off.
And what you see with spin-offs in general is, you generally see first of all they start trading at low valuations and that’s due to the indiscriminate selling that we were talking about earlier. But then you also see, because there’s lower, or the bureaucracy is cut back, you see improving fundamentals. So you see accelerating revenue growth oftentimes and improving margins, and it’s exactly for the reasons that you talked about that the companies become a pure-play and that it is more focused on just one individual area that can really control its own destiny.
And then, pure plays have a greater chance of being acquired. Spin-offs, as a category, about 20% of them are acquired after two years. And that’s also a kicker too that helps with the long-term performance of that area.
Frank Curzio: So when I look at, let’s go to your newsletter because I have so many questions, and I feel like asking them all at once. So you have a newsletter called Stock Spin-Off Investing where you’re recommending the top spin-offs. And you have an unbelievable track record, so you’re definitely picking the right spin-off to invest in.
One thing that I always love discussing because we have a lot of experts that come on this and I interview every week is a methodology. Because everyone can give out stocks, but it’s really nice to know like how people invest because it’s always different. It’s always a learning experience, and we all want to be the best and just always be able to incorporate a lot of this stuff into you and learn as much as we can.
So my question, what is your methodology? Because your performance is amazing, you’re picking the right spin-offs. It’s not just closing your eyes and buying any of these as you know. I mean, do you use fundamental analysis? Is it looking at the management team? Is it growth potential? Are you looking from a macros perspective? Where, hey, this company just spun-out like, a certain cloud division, which is really, an exciting market. It’s going to get a higher multiple, dividend. What are some of the things that you look for before recommending a spin-off?
Richard Howe: Yeah. So, basically, all of the above. It’s an awesome question, and you’re totally right that all spin-offs do not perform. I mean, some of them are really well-capitalized with a lot of net cash and limited debt on the balance sheet, but a lot of them are not. Some of them have significant debt, and some of them are in cyclical industries. And so you really have to be careful because not all spin-offs outperform. The bottom core top performing spin-offs lose like 40% of their value in the first year, so it’s not a situation where you can just, like you said, blindly just pick spin-offs.
So what I do on every spin-off, currently I’m focused on the US market, but I’m going to be expanding my coverage into international spin-offs as well. But for every spin-off that comes to market, I perform what I call a deep dive. So it’s called the 12 or 15-page report where I focus on the fundamentals. So I’ll look at the industry. Is the industry growing? Is it, is it capital intensive? What’s the competitive landscape?
I’ll look at the individual company’s fundamentals, margin. To what extent does it have a recurring revenue? Is it a capital intensive business? What are the returns on invested capital? And then I’ll also, yeah, so I’m definitely focusing on the growth potential. Some spin-offs are growthier spin-offs or growthier companies. Some are more focused on income generation and dividends. So you’ll really see all sorts of different types of spin-offs. A recent spin-off that I like is a company called Contour Brands. It’s a spin-off from VF Corp.
That company in just doing the work, you learn that the company planned to pay a $2.24 cent dividend, and so that was a really important piece of data that not many investors would have known before the dividend was actually declared. And so when that stock started selling off indiscriminately when it was spawned from VF Corporation, it got down to a level where it’s dividend yield was trading at over 8%.
And so that was just an example of, if you had just done the work ahead of time and realized that this business generates real cash flow, it’s relatively defensive, and they’ve already declared this pretty significant dividend, you can have the opportunity to really buy a solid company at a very attractive valuation but also a very attractive dividend yield.
So it’s really, I’d say my focus is primarily on the fundamentals as opposed to top-down, so I try to look at every spin-off that comes to market. The areas that I found are the most interesting are the smaller cap spin-offs. And the reason is because they generally are going to be sold off very, very sharply right after they’ve spun off from the parent.
And so oftentimes if it’s a really good company and its growing, but it’s just trading off because index funds are selling it, then you can really get into an unbelievable company at a really attractive price. But really it’s fundamental analysis. For me, I do my deep dive, whether it’s 12 to 15 pages on every spin-off that’s coming to market. I share that with my subscribers, because they could have a different view of the spin-off than I do, so I want to kind of share my work. But then I only recommend the top five to 10 names in a year that I have extremely high conviction in. And so that’s really the process.
Frank Curzio: How many spin-offs happen every year, roughly? I mean, that might be a tough question. I’m just curious to see the pool that you’re going from, to get to those 10 names.
Richard Howe: Yep. It’s roughly, I would say there’s roughly, in any given year, there’s about 20, so it’ll range call it from 15 to 40, maybe, in the US but, they’re generally about 20 new spin-offs. I will recommend spin-offs that have happened in prior years. So if there’s a spin-off that I’ve recommended before and it appreciated, hit my price target, and then I recommended the sale and then, the stock comes back down to earth, that’s an example of something that I could recommend again. But then I, in any given year, there’s probably give or take, you know, 20 spin-offs in the US.
Frank Curzio: Now, a tough question here. What is something that you would see in a spin-off that would be a red flag? Like, maybe it’s a top person, who loves that part of the vision or whatever that he’s not going over to the spin-off. I don’t know, I’m just throwing something out there. Maybe, like you say, you’re looking at fundamentals, but we also see companies that IPO, again, not apples, apples comparison like Lyft and Uber, which are actually great companies that are growing, but they came out of ridiculous valuations. A lot of head dude investment banks who collected their fees and good for them and shares got killed.
But is there anything that you see in stocks but notice where, it’s all about structuring the deal and sometimes when you look under the hood, a lot of this is for the parent company and they just… I wonder if there’s anything you’re like, “Whoa, okay, this is a red flag. Let me avoid it”?
Richard Howe: Yeah. So, really good question. So yeah, a couple of red flags. One is debt. So you definitely want to look at debt levels. You want to look at absolute debt levels and that debt relative to EBITDA. So, three times, a lot of the spin-offs that come out, will have some debt, but if you’re looking at a spin-off with more than, call it three times debt to EBITDA, that’s something that I’ll definitely look in to a lot closer.
Another thing, just staying on the debt side, and this is a lesson that I’ve learned the hard way is that, look at the rate of interest on the debt. So a lot of times you won’t find out the rate of interest until the debt actually prices. And so, one company that I was a little skeptical on was this company, this turbocharger company, that spun out from Honeywell. And it’s not a name that I’m currently recommended or have recommended it, but it’s continued to sell off, and so I’m taking a deeper look.
But one thing that’s super interesting about this company is that it’s cyclical because its end market is auto company OEMs. And so, you have that cyclical exposure, and it has a decent amount of debt, but their weighted average cost of debt is like 3.5%, so what that tells me is that the creditors who, are looking at the downside more than the equity guys are not too concerned with the debt load for the company.
So I would say, not only the debt load, that’s kind of obvious, but also just the rate of interest. If you’re seeing anything, up closer to 8% or 10%, you really have to understand that that’s the cost of debt, so what is the implied cost of equity, it’s gotta be 20, 25% plus. It could work out that the spin-off could return that high level on an annualized basis, but you just got to recognize that there’s a lot of risk associated. There’s a lot more risk associated with that name than a name that has a much lower interest rate.
I’d say, in terms of some other things that I look for. Be wary of hyped spin-off. So, the spin-offs have done quite well. They’ve attracted more attention. Oftentimes, you’ll see a lot of attention on Seeking Alpha where a certain spin-off is kind of hyped ahead of time. That was the case with a veterinary tech company called Covetras. It was a spin-off from Henry Schein.
Everybody was all hopped up for the spin-off. Everybody was all excited. It’s a defensive business because it’s animal health, plus it’s tech, recurring revenue, expanding margins. And you just got to make sure that you take a fresh look at the company and really understand the fundamentals and convince yourself that it’s an interesting opportunity and the valuation makes sense, because that’s one that came out around 40, and it’s performed pretty poorly. It’s all the way down to about 10 or 11 bucks currently.
And then I guess one other red flag that I look for is, oftentimes spin-offs will bring in a new, or a parent company sometimes will bring in a new hotshot management team. I actually do not prefer that. I prefer the spin-off to be run by a company insider that’s been within the division for a number of years because that company or that individual will be able to really know where the low-hanging fruit is and he or she will really be able to kind of know, will be able to take advantage of the cup bureaucracy and make the investments that need to be made.
Whereas, if a new CEO was brought in, oftentimes you’ll see operational hiccups, the company will have to take down guidance, whether it’s revenue guidance or operating margin guidance. And so that’s, I guess another thing that I look for, is the management team coming from the parent company, do they have significant experience with the business, or is it a management team that’s completely new to the business?
Frank Curzio: Yeah. And guys, listen, so to say, this is a great behind the scenes because a lot of us, what they get, right? I mean what newsletter they get, Rich. What they get is just a pick, but they don’t understand how much research goes into it, how many times we’re writing up a stock that, “Okay, this is going to work. This isn’t right.” Once we dig deeper.
But, this is the kind of analysis that’s done. And it’s funny that I asked you that question and I think you spent more time on that because same with me. Our job is to find out, okay, what’s wrong with this stock? What am I not seeing? And it’s nice just to, you know, it’s all about learning and I think it’s really cool going behind them and then showing what you like and don’t like about a certain spin-off.
Now, with that said, I saw this question on your blog, which I thought was really cool, and there’s a question I was going to ask anyway. But subscribers asking you, saying, “Hey, you know what? This is such a small market, and like you said, maybe 20 of these and you recommend 11 in your newsletter,” and they were asking, “Hey, do you focus on any other markets?” So anything outside of that. And I wanted to see, because again, we’re covering this in-depth here when it comes to spin-offs, but what about outside of spin-offs? Are you covering other the areas in the market?
Richard Howe: Yeah, definitely. So one thing that I’ve recently expanded into, so, I recommend five to 10 spin-offs per year that I have high conviction in and I own all my names, so I eat my own cooking. But another area of the market and it kind of plays along the same theme as spin-off, it’s another market inefficiency, and it’s referred to a special situations. So it could be a merger arbitrage situation where a target company, it’s been announced that it’s going to be acquired and it’s trading at a discount to its acquisition price. And, you have a sense that the deal is definitely going to close. And so you can make a nice kind of uncorrelated five or 10% return.
Another special situation that I recommended that I wrote up on my blog was the situation where, and the reason why I learned if it was because it was a spin-off, so this was Eli Lilly. So the big, big pharma company, they spun off their animal health division Elanco, but the way they did it was interesting. First they IPO 20% of Elanco and IPO did a great, really, really nice valuation.
And then what they did for the remaining 80% of their stake of the animal health company Elanco is, they did what’s called a share exchange. So they said, “Listen, Eli Lilly investors, if you own your shares of Eli Lilly, for every $100 of shares of Eli Lilly that you own, we’re going to give you $106 of this new spin-off, Elanco.” And so it was basically a free way to make 6%.
So, obviously most Eli Lilly investors took advantage of this and tried to exchange as many shares as they could into the animal health company Elanco but there was what’s called an odd lot provision, whereby if you owned fewer than 100 shares, so if you own 99 shares, you are guaranteed to get fully transferred into Elanco. So what you could do is, you could buy 99 shares of Elanco and then ask for it to be exchanged for your pro-rata share of, of Elanco.
And so what ended up working out is, you were able to make 6% on your money if it worked out to about a $750 return on just two weeks. So it’s, no, it’s not a huge win, but it’s pretty interesting to be able to make $750, really doing very limited work with very limited risk just by participating in what’s called an odd lot provision.
Another idea, which I actually have live on my site. I’m not going to disclose it just because it’s some of these examples are, are a little tricky because if, if you disclose them, they’re in very small companies and so the volume will spike in the stock and the opportunity won’t be as attractive. But there is a company that recently announced that they’re going private and the stock is trading at about $19 and or they announced that they’re going private and the way that they’re going private is, that they’re going to de-list.
They’re basically going to de-list themselves from the stock exchange. They said, “Listen, our valuation is so low, we think we’re undervalued. It cost us $1 million bucks a year to file our reports to get our financials allotted, to pay the lawyers what we need to do to get our financial statements in order. And we also have to spend time on conference calls, so we just want to save our time. We want to save our money. We’re going to de-list.”
But you’re not allowed to do list unless you have 300 or fewer shareholders of record. So to do that, they basically said, this company said, “Okay, if you’re a small shareholder, if you own 99 shares or less, we’re going to buy you out at $30 per share.” Now the stock is currently trading at $19 a share. So what you can do, you can go into the market today and basically buy this, buy the stock for 19 bucks and then the company has announced that it’s going to be buying you out at $30. So it’s a way to make, roughly a little bit over $1,000 profit on this transaction.
There is a risk that this transaction doesn’t go through. I think it does from reading the proxy statement. I think this company really wants to go private. And so I’m confident that the transaction will go through. But that’s just another example of a situation where you… A special situation, which isn’t correlated to the market and you can make, call it 500, a thousand bucks, with a short-term trade with limited risks.
I’ve expanded my focus on this. I’m also looking at ways to front-run the index. This is something that I’m still kind of working on, but I’ve been analyzing in the index patterns and, stocks are added to the index or removed from the index at a certain date. In the S&P I focus primarily on the S&P indexes, and I’ve been analyzing the performance of stocks that are added and removed from the index. And what I found is, when a stock is added to the index, if it’s a small-cap index like the S&P 600, generally those stocks on the day that the day before they were added, they outperform or, or they generate about a 1% return, which isn’t bad, but it’s not, not really anything to write home about. But they also recommend or they S & P also tells you which stocks are going to get removed from the small-cap index.
And so I’m doing more work on this, but the analysis that I’ve done suggests that, on average stocks that are getting kicked out of the index on the day before they’re removed from the index, declined by about 8% per cent. So you can go in there and short those names and make about an 8% profit in one day. So that’s another area that I’m looking at, but it’s all about market inefficiencies, so really just trying to find small areas where other investors maybe aren’t looking, because those are the opportunities that I think are most interesting.
Frank Curzio: Now, speaking of opportunities, my audience loves this part where I always try to get some ideas from all the guests that I interview. Is there anything out there other than what you mentioned and I know some of those a little vague and I get it because they’re… I don’t want you to give away any paid information that people are paying your newsletter for, but does any spin-offs or any ideas out there that you currently like at these levels?
Richard Howe: Yes. Yeah. So, so one name that I already talked about was Contour Brand. So Contour Brands was a spin-off from VF corporation, and Contour Brands is focused on the denim market, so they’re basically jeans. They are a jeans pure play. So their key brands are Wrangler and Lee. So very well known, very affordable jeans.
The interesting thing about this business is it is a smaller business, but it’s a very profitable business, and it generates a ton of free cash flow. So over the past three years, it’s generated about on average about 300 million of free cash flow. And this is for a company that is marketing out of about $200 million. So, it generates a ton of cash. And it’s also an example, like we talked about before, Frank, where this company or this division was really ignored within the bureaucracy in the larger company of VF Corporation because they were smaller, slower-growing division versus some of the higher-flying brands like Timberland or Vans that VF Corp has.
So VF Corp spun off this denim company as really a growth, or really as an income play. So Contour has decided they’ve declared that they’re going to pay out 65% of their net income in dividends, so they’ve declared their two $2.24 dividend. The stock, it sold off like crazy and we were able to get in below $30, and it’s appreciated to about $35, but it’s still trading at about a 6.5% dividend yield, which is super attractive. It’s the highest yielding dividend yield in the consumer space, as far as I’ve seen. And then there’s a lot of low-hanging fruit too.
Just to give you one example, the Wrangler brand, it’s a very well-known brand. It hasn’t been launched in China. The Lee brand is actually the leading denim brand in China. But for some reason VF Corp didn’t think it made sense or they just didn’t allocate enough resources to launch the Wrangler brand in China. And so this is an example of something that just is a no-brainer, a way to really increase revenue with really limited investment that wasn’t done when this company was part of its parent company, VF Corp, but will be done, and that launch will happen in January.
So, that’s a name still trading at about nine times. Earnings are still very cheap. Defensive sales only declined by about 9% during the great financial crisis. The great thing about jeans, and especially inexpensive jeans is people buy them in good times and bad. So it’s a really nice defensive name, which pays a great dividend. So that’s one name.
The other name that I would mention is Madison Square Gardens. I don’t know how many of your listeners have paid attention or focused on Madison Square Garden in the past, but this is a company that is has some incredibly valuable assets and it’s been trading at discounts with some of the parts valuation for a while. And the thesis forever was that, “Hey, this company is going to be broken up and all of these assets are worth a lot more separated than they are together.”
Well last year MSG announced that they are indeed going to be spinning off their sports business and the stock immediately jumped up from about $250 all the way up to $330. And then, as the spin-off euphoria kind of stated, the stock has stated. It’s all the way back down to $262. And, the interesting thing here is that MSG is going to be spinning off its sports business in the first quarter, so really less than, in five months or less, this breakup is going to happen. And at the current valuation, the stock looks incredibly compelling. Just to give you some quick numbers.
So Madison Square Garden owns the Knicks franchise, so that’s worth $4 billion according to Forbes. They own the Rangers, which is worth 1.6 according to Forbes they own the Madison Square Garden Arena that’s worth 1.2 in terms of the latest CACS assessment. And then they also have $1 billion of cash on their balance sheet. So if you add that all up, you get to about a $7.8 billion valuation or $328 stock price and the stock’s trading at $264, so at a significant discount to those values and those values are actually low.
So typically I value the Rangers and the Knicks at what Forbes values them. They’re kind of the preeminent market leader in terms of the sports franchise valuations. But really Forbes has been very conservative when any franchise has sold. For instance, an NBA franchise, it’s sold on average at about a 38% premium to the last Forbes valuation. So the Knicks are probably worth close to $5 billion. The Rangers are probably worth closer to $2 billion.
Also, MSG has some other assets. They own the Tag group, they have an equity ownership in the Tag group, which is an entertainment company that’s worth about $200 million. Madison Square Garden has air rights, which are worth anywhere from $250 million to $750 million. And there are a bunch of other assets I won’t even get into. But I think this one, my two favorite ways to invest in spin-offs, one is take advantage of indiscriminate selling. And that was kind of an example of Contour Brands. It was sold off like crazy, and we did our work ahead of time. We were able to get in at an attractive price.
And then my other favorite way to make money from spin-offs is to invest ahead of the breakup when you know the catalyst is coming, you have a good sense of what the valuation is, and all you have to do is wait. You just have to wait six months, and the value will be unlocked. So yeah, I think Madison Square Garden is definitely interesting, especially heading into the first quarter.
Frank Curzio: Okay. And now this is the most important question, and if you say yes, I don’t know if I’m going to publish this, but by far the most important question. Are you a Patriots fan?
Richard Howe: Unfortunately, I am. Unfortunately, I am. Yes, I’m a Pats fan. It’s hard not to be up in Boston. But I hope you do publish this and don’t hold it too much against me.
Frank Curzio: Yeah. I mean, I’m an Eagles fan. I actually went to the Super Bowl against the Patriots. It was nice to win that one since you guys win every year and the crowd was probably 75% Eagles because you guys make it every year and they can’t afford the Super Bowl, yeah. But I just, I really liked the team this year. Defense is probably the best defense I’ve seen on that team, and it’s incredible. But everybody from Boston is guaranteed a Patriots fan, and we’re all jealous of you even though we say we hate you, we hate Tom Brady, we all want to be Tom Brady and, yeah, we’ll jealous. So, let’s finish with this. If someone wants to learn more about you, your newsletter about spin-off investing, how could they do that?
Richard Howe: Yeah, definitely. So just come to StockSpinoffInvesting.com, or you can just Google stock spin-off investing and I’ll pop right up. So come to my site, check it out. If you’re interested in spin-off, I publish a free spin-off calendar where I will let you know the next spin-offs that are going to be spinning out. And I also publish a free completed spin-off calendar where you can see which spin-offs are the most recent ones that have been spun off. So it’s a really good free resource. I also publish a bunch of free content on my blog, which hopefully you’ll find interesting. And then I also have a premium newsletters as we discussed, so feel free to check that out.
Frank Curzio: All right, that sounds great. Rich, wow. Packed with information. These things, these interviews, usually take 20, 25 minutes. This went over because we had so much to talk about, lots of ideas you shared. I really love having you on here. It was fantastic. I appreciate taking the time, and hopefully, you join us again soon.
Richard Howe: Awesome. Thanks so much, Frank. This was really fun.
Frank Curzio: All right guys, great stuff from Rich. Really love that interview. You guys pay close attention to this area of the market. In fact, I see a lot of companies spinning off non-core assets, and it’s funny because where I’m seeing this happen and take places in the security token industry, where they’ll tokenized a certain percentage of an asset to bring in more value to that company. And this is something I’m seeing right now is, security token markets are really taking off, but they’re also focusing on spin-offs and just and providing value. And a lot of these things are being spun off are just, your regular asset to, not necessarily a spin-off, but you’re tokenizing a small piece of it and adding value to it, but pretty interesting stuff. Spin-offs are known to outperform the markets. Like Rich said, allows a company to work independently were, hey, they’re focusing on its core. It also allows you to find a management team tailored to 100% of this business.
And I love the fact that he said that, which was interesting, right? The red flag part where he said he likes someone coming who’s already in the company that was focused on that division. They’re bringing it into the superstar management team, and I see that a lot because a lot of those patches, those incentives, are based on earnings growth and, yeah, you see a lot of employees get fired and it gets crazy because, again their incentive is really to grow this company, grow the profits, which is good as an investor but sometimes they really go overboard, and you’re not familiar with, you know, they’re familiar with the industry but not so much that particular business. So that was interesting, saying that’s something he may avoid if they hire a superstar management team compared to bring on someone who’s been operating that division very well for a long time.
But in short, if you’ll look at this it’s, you’re buying a pure-play, which I love a lot of companies, even cloud companies it’s hard to get pure-plays. You can on some certain of them. But you know, Microsoft is not a pure-play on cloud. Amazon’s not a pure-play. Well this is a pure-play. If they spun out that cloud division, those would be pure plays, which they’re not going to do obviously. So a lot of these do have huge growth potential and not be bogged down by their parent, which is usually a much larger company. And sometimes they pay dividends and slow growers maybe in consumer staples and things like that. So just a lot of benefits. And Rich and I are not the only ones that like spin-offs. I mean he was talking about, it was Joel Greenblatt, right? Talking about potential spin-offs, and, again, market genius, but also if you go back, I know most of you read One Up on Wall Street from Peter Lynch.
He’s written about the potential spin-offs, how he loves them. Seth Klarman, another big shot, talks about in his book, A Margin of Safety. Lot of hedge funds talk about the benefits of spin-offs, but it’s an industry most mom-and-pop investors don’t really focus on for some reason. And I don’t know if it’s because they don’t have access to it. They really, spin-offs are not exciting stories, so you’re not hearing them mention on CNBC a lot. Even when they do spin-off, it’s not like they come upon IPO calendars or anything or this new issue. So, it’s hard to find a research on them sometimes or exactly when they’re going to spin-off, but you should focus on this market and here’s a way to do it, through Rich.
So yeah, so I brought him on the show. He’s one of the best in industry that does focus on it. So I want to thank Chris Mayer for definitely pass that name onto me. I thought that interview is great. Remember this podcast about you, not about me. Let me know what you thought at Frank@CurzioResearch.com.
Now, going to move on. It’s not your traditional educational segment, but I have a lot of things that I’m excited about that I want to talk to you about. Basically, things are initiatives that I’ve asked you before to write in. What do you want to see and it’s going to get really crazy over the next few, next three, four months into end of the year basically. But a lot of these growth initiatives, a lot of things that you want you’re actually going to see, and I wanted to cover some of them. Because it’s a fun time, it’s a crazy time, when you’re going to see how many things are going to launch.
Again, it’s all going to happen in the next couple of months. One of the first things that we’re very excited about is, we’re going to launch a trading service. The editor’s going to be Rich Suttmeier, who is actually been one of the best performing analysts on my podcast over the past three years. Yes, we track this stuff. Dollar Stock Club, I’m going to mention that in a minute, which used to be All-Star Portfolio, but he’s provided a lot of great picks he could have made money on last three years. I know he’s been bearish, but he’s also a trader and trades within those parameters, but doing very, very well. So Rich has a proprietary system that tells you exactly where to buy stocks and short stocks.
So for me, I took the Liberty of learning his system. He walked me through it, and it’s absolutely amazing. The components he has, it’s almost like an algorithm. If you look at an algorithm from a major firm, whatever, some of the biggest, you can go to any, whatever, Bridgewater. There’s probably a thousand data points that you heard of. Maybe it’s insider buying, it’s 200-day moving average, it’s if it breaks the 50-day moving average, whatever it is. [inaudible 00:51:58].
So, within their algorithm they may take 30, 40 different of those factors, which you all know, but what’s original is the algorithm and his algorithm and his system is amazing, and it shows incredible results when he’s trading. So now I’m excited to launch a product like that at Curzio Research. There is going to be another component to this. And by the way, if you’re not familiar with Rich and the trading service, go to our website, CurzioResearch.com, charter the week absolutely for free.
And I’ve asked you to write in what do you think, and we’ve got tons of, tons of, positive notes on it, and that’s why we’re launching a newsletter around them. Now launching this newsletter, for me, again, I’ve been in this business my whole life. It’s about the customers, it’s about you, and there’s a ton of trading services out there, and everyone says theirs is better and whatever.
So I wanted to add value and say, “Okay, what would I want out of a trading system?” More than just telling me, “Hey, here’s a stock, here’s, here’s a recommendation.” Much more than that, but I wanted to add more value. So what we’re trying to do, and I think going to be able to do this, we’re going to put up a ticker box on our site. It’s going to be under His Paid section within Curzio Research where not only is Rich going to give you a specific buys and shorts based on his trading system on a weekly basis, but any subscriber to that product is going to be able to enter any stock in their own portfolio.
I know you know stocks. You own stocks outside of the ones I recommend if you follow my newsletters and things like that. So in your own portfolio, you could then be able to put any stock in there, stocks that we don’t have on the recommendation, and it’s going to give it a levels of buy and sell based on Richard’s system. For me, I thought that was really, really cool if we could do that. That’s a lot of added value. I haven’t really seen that anywhere.
Usually these trading services, and a lot of them are BS because I’ve seen it. “Well, buy here and sell here.” All right. And none of them have track records. Rich has a track record. He has an amazing amount of great picks. His back row calls had been really good other than the fact that he has been predicting a crash for a long time, but he’s trading around that. He’s done very, very well over that time, and that’s evident in a lot of the stuff of acts that he’s recommended on this podcast for at least the last, five, six years. I think I’ve been interviewing probably for seven, eight years now. I’ve known Rich for a very long time. He’s excited. I’m excited, and I know you guys have been excited based on your emails.
So we’re going to launch this probably within a month. I mean, we’re trying to get that part where you have a ticker box in there. Again, it requires a data feed where we might have pay a licensing fee and it’s a very big company that provides that data feed, but I think it’s going to be worth it because that’s something that’s added value that I don’t think you’re going to find with any other product out there where it’s not just, hey, you’re right, you’re buying a newsletter, and they’re going to give you a pick every single week or every single month or whatever the timeframe is. Now the system’s going to help you with your own portfolio that you actually put a symbol in there, and it’s just going to shoot out levels.
It’s going to say, “Hey, if it’s trading about this level, be careful. If it’s trading below this level, hey, it’s a good time to buy,” and it’s pretty cool. You’re not going to see the algorithm or how it comes to those levels, again, that’s proprietary, but who cares? What you really want to know is just the level to buy and sell, and you can do that with your own portfolio. So I’m really excited. We’ve been working really hard to launch this product. We’re probably gonna launch it early next month. I’ll send you emails, let you know exact dates of when we’re going to launch this thing. But for us, very excited.
And by the way, if you’re not on our email list, just go to CurzioResearch.com. It’s a box at the top where you can enter your email, and you’ll get access to tons of free content guys. And the reason why we offer so much free content is because we know once you see our free content, and I’m not talking to so many guys in the audience who listen to this podcast all the time and know we’re for real and how much passion we have about it. And I think you guys have to agree with everything I say, and I know you don’t, but you guys know that when it comes to our customers, that’s first and foremost. And that’s what we care about.
And we do care, we do free podcasts, we provide a lot of free information. Because when people who are outside don’t know us, and that’s how we build our company, right? It’s pretty easy to build it when people know you. You can always generate money and people know your brand. But to really build it into a huge company, it’s how do we explain Curzio Research to people who never heard us? And you can’t charge them $1,000, $2,000 for a newsletter because they don’t know you.
So there’s a process and what we do is we offer a lot of free stuff, much more than our competitors, because we know once you to see that, it’s going to be really cool stuff, and for us, it’s resulted in a lot of people subscribing to our newsletters, anyway. Well, all you do is put your name in the box absolutely for free at CurzioResearch.com, and you’re going to get a free podcasts with transcripts that we have on our site. I know a lot of you listen on iTunes. We have the transcripts on our site, which is really cool.
You’re going to get the weekly breakdown, the best stories of the week that we highlight, the Token Tracker site, which is really going to take off. We’ve seen so much demand for that. It’s amazing. Everything you want to know about security tokens. It’s getting bigger and bigger. Amazing how much this industry has grown in the past few months. And access to our blog posts also. By being on that list, we’ll alert you to any of our new product launches, which we’ve got a lot, so got more to discuss, and also special discounts that you get specifically from being on our email list. So be sure to sign up because it’s absolutely for free.
Now, we’re also plan a launch an income newsletter over the next quarter or so. A lot of you’ve been asking for this type of product. I can’t blame you. When you look at the newsletter industry, the average newsletter buyer, I don’t know if you guys know this, I don’t know if that’s the case for us, I think it’s a little bit younger, but it’s around 60 years old. These are people that have retired. They can read a lot of different newsletters.
I would say our demographic is younger than that, but if you’re looking at that demographic, it’s so difficult defined income. So I can’t blame you that, “Hey, Frank,” I get so many of these emails saying, “Could you please give us an income newsletter? Something where we can generate income,” and I get it because interest rates going back to zero, very difficult to find income anywhere. That’s going to probably be like that for a very long time, and we’re in talks to higher-income specialists that will not just be recommending blue-chip stocks.
Again, I’ve been in this industry my whole life, I know thousands of products that have been launched around this. Things that work, things that don’t work. I’ve seen income newsletters that just focused on blue chip stocks. You don’t need someone to recommend Microsoft to you, or whatever MLPT. For us, when I look at launching a product, I want it to go anywhere. Anywhere I think you could generate income. And I want someone out there, and this is great for the person we’re talking to, and has a 95% shot. Just working on the final details of this, which is fantastic. Once we do, we’ll launch this probably in the next three months, but this person is amazing where it’s not just going to be focusing on generating income through blue chips. You look at that price, it’s going to recommend ETFs, option strategies, close-end bond funds, regular closed-end funds, REITs, MLPs, anywhere, international.
That’s what I want, and I want to make sure that this is a person that I’ve looked at, a person that’s been in the newsletter industry for a very, very long time and I want to simplify these types of investments where people don’t know an option, strategy or a covered call strategy, we’ll go over it with you every single step. So I’m excited. Pretty sure we’re going to hire this person. Again, if I had to give it a 95% chance, we’re just working out the final details, but I would expect an income newsletter being launched next quarter.
Now, once we launch Rich’s newsletter, we’re going to have six paid products, man. We’ve come a long way, right? It’s pretty quick. So six paid products in the umbrella and seven with the income newsletter. So we’re gonna have a special… I don’t know what to call it. Like a black label club where one price will give you access to all of our products, and also give you access to every product we launch in the future. So basically, if everything goes well over the next five years, we’ll probably have at least 20 products, and more than that under Curzio Research brand. So I don’t allow you to ask for a one-price-for-all membership, since maybe you own all of our products, and by launching more products it’s going to get expensive.
And look, we want to take care of our customers, our best customers especially, where it’s expensive to subscribe to every single one of these products individually. So we want to come up with one price and all of our competitors have this type of membership. For me, I didn’t want to launch it until we had more products, it just didn’t make sense, and now we do. Now we have enough products. Now you could see that we’re actually launching new products and that one price is going to include not just access to everything on our website and all of our products, but everything we launch in the future, and that’s why it’s a huge benefit.
So, I’m only going to charge $500,000 for it guys, so raise your hand if you’re in. Just kidding. It’s going to be a competitive price. It’s probably going to be around the price of three to three and a half newsletters if you purchased them at full price. And again, if you’re looking three, four, five years, we expect to have a lot of new products. And again, we’re launching three of them. All these initiatives right here, guys taking place before year-end. Let’s say it one time.
So the hip replacement surgery was not a good time, but I had to actually get it done right away. It was starting to really, really hurt, so if I had a choice, I would have waited, but everything’s in the works. Like I said earlier, I have an amazing team that’s going to make this happen. A lot of fun stuff and I wanted to go over a lot of those things because these are some of the things that you requested. That’s why tell you email me, Frank@CurzioResearch.com. Let me know what you want. That’s what we’re here for. We’re fortunate to have access to so many different analysts. A lot of these guys are sick of working at wall street, sick of working at big firms, these bureaucratic places.
They want to want to show on newsletters. They’ve come to me, they’ve asked me about it, so we’re in a position to really listen to our customers and say, “Hey, what do you guys want?” Of course, from our end, we have to be able to market it. Obviously, it’s a business, but we could market an income newsletter, especially in these days. It’s been hard to market in the past, but with interest rates going to stay this low, very, very low for a long time, there’s going to be a lot, a lot of people, a lot of demand to buy income-related products.
Well, so the trading service, we’re listening to you too. It’s going to be an awesome trading service. Something that I’d want to purchase. And again, adding those features, I think it provides incredible value for you. And then, the whole no black label type membership. And by the way, that black label type memberships also going to give you access to future conferences, which by 2020 we’re hoping to have our first conference.
Unfortunately, that means you might have to see me in person, not the greatest thing, but it’s a lot of fun. I love these things. I love speaking at conferences. I love walking the halls and talking to people, especially my subscribers. Hey, I just think that’s cool. Some people, not too crazy about that. That’s their personalities. They like to be, to themselves and that’s fine. For me, I love it. I love meeting you guys. I love getting the emails, and we’ll try to answer them if I can, which is really cool. So that’s going to also give you that black label membership access to future conferences and also access to my network, which as you know is very, very large, thanks to you guys, because I don’t know why you keep listening to this podcast and telling your friends about it, and make it bigger and bigger.
So now we have billionaires reaching out. We have Heads of States reaching out. We have so many people reaching out that want to be interviewed on this podcast, I feel like we’re the Tonight Show right now, which is cool. And, that gives you access to an entire network. And these are guys, again, Chris Mayer, I haven’t talked to in months, and just out of nowhere he’s like, “Hey Frank, definitely take a look at this guy. He’s really good.” And I thought that interview was great with Rich today, but that’s how it works. And doing this for 10 years and interviewing all these people, that network, my Rolodex has gotten pretty big, and I have a lot of great people on it that are willing to help and also people that we could potentially hire.
So everything I mentioned to you right now is all the future products, and the future’s not that long, because we plan on launching all of those before year-end. So it’s going to get crazy. You’ve got to have an awesome team to make this happen. But a new product we just launched is calledThe Dollar Stock Club, and this is what I’m most excited about. So this was our old All Star Portfolio. We branded it toThe Dollar Stock Club where subscribers will get a new stock tip every week from a professional for just a dollar. No bullshit. No fine line print. Just a product with a really cool name that’s going to deliver. So you know I interview some of the smartest people on Wall Street for this pocket every single week, and they always share ideas with you.
For me, I’m looking at all these ideas and figuring out what’s the best to help you guys out, because a lot of them share a lot. Rich, just interviewed Rich, he had a ton of ideas. So we’ll pick one, write up one page, send it out to you to Dollar a Week. Everyone that we approached with this loves it. It’s a product that you won’t find anywhere, and I don’t think it could be duplicated because they don’t have that kind of access where they’re talking to someone, a market expert, every single week.
So, new products, new ideas, a Dollar a Week, andDollar Stock Club. If you want to sign up for a full year, it’s going to cost you around 52. It’s like $49 I think we offer it for the full fee. Just $49, you can get 52 picks, which is awesome. So I’m sure you’re subscribed to tons of, we call them front end newsletters, which basically low priced newsletters, usually below $79 a year. Again, you’re not going to find anything close that represents this, anything close that can mimic this. It’s unique. It’s special. Again, it’s no BS.
You’re going to have a new stock pick from an expert analyst every single week, which results in a ton of new ideas. And what I love about this newsletter, because a lot of you are subscribers already because you’re trying it out. It’s cheap, I have nothing to lose, but a lot of these ideas are original. Like small-cap picks, income. You will see some large caps every now and then. But cryptocurrency picks, shorts, growth value ETFs, international going anywhere and since it happens on a weekly basis, if there’s a stock that’s international and maybe you don’t like you’re going to get another pick next week. It’s not, “Oh, I’ve got to wait a whole month. I’m not that crazy about this stock.” Every single week for a dollar.
So, you’re looking at these guys who are providing these ideas. A lot of them have their own newsletters and services that charge $3,000 a year for it. I know some of the guys I interviewed, hedge fund guys, they get $40,000 on more for a single idea, which is nothing to hedge funds. That’s how much you want to pay because everyone wants to new ideas. Everyone’s looking for new stock picks, new ideas. Well, here it is. Here’s that newsletter. It’s something that we operate on a loss, obviously, because it’s so cheap. And why would I do that? Because when people come in and see the research behind this, there’re going to subscribe to our premium products because they’re going to say, “Okay, this is a no BS product. It’s true to form. It’s a dollar pick every week. It’s great research. It’s a really quick, something you could buy right away.”
We publish every single Thursday. It’s a lot of fun. And some of these picks are not only mentioned on-air, but I would say 30 to 40% of them, you’re not going to hear on-air because I talked to them before after the interview and just, they’ll ask me for ideas, and I share my ideas. They share their ideas. So it’s not like, “Hey, I got to listen to the podcast, and I’m going to get all this anyway.” No, because we’ll actually picking just one stock out of all they mentioned or the stock, maybe heard or maybe giving to you something that they told me offline when, before or after I interviewed these experts.
So do you want to try it? You can. It’s $4 for a monthly membership. You get no BS, so if you hate it, which I don’t think you will, you may, I don’t know. But if you do hate it, you can cancel anytime. It’s not, “Oh, you’re stuck on this,” no. So again, with our customer service department, the way we run this business, if you like something, subscribe to it. If not, cancel it. That’s the way it should be. It should be very simple, and you can do that. So again, everyone we put this in front of loves it. I’m excited. We’re going to put a lot of marketing dollars behind this thing because we’re seeing huge demand.
But it’s a product I want to offer you guys because it’s going to give you access to what you love most. There’s new ideas, and it’s not just new ideas that are random ideas. These are coming from some of the smartest people on Wall Street that I’m interviewing on a podcast and it’s incredibly cheap. You’re going to get 52 ideas every year. So you’re going to be full of new stocks, new ideas, really excited about this product. This is something you could buy right now. If you want to try it out, go to Curzioresearch.com, on the right-hand side, you’re to see a banner saysDollar Stock Club, which is also going to include a one-minute video of me, if you want to watch.
Again, not that you have to watch me, you want to watch me, but it’s pretty cool because it’s kind of a funny video just right in your face, say, “Hey, if you want it, fine. If not, don’t worry about it, but it’s a dollar pick. It’s up to you.” But once you click that, you don’t have to watch the video. It’s very, very short, where you can go to bottom and you see how to subscribe and get you offer there. So again, that’s at CurzioResearch.com if you’re interested. A lot of you have already subscribed to that. That’s definitely going to be our biggest product, the biggest introductory product. And I’m happy because nobody’s going to duplicate it. It’s original. It’s really cool. And it’s a club.Dollar Stock Club, it should be a lot of fun.
So guys, I’ve been reading your emails, paying close attention. We’re launching these amazing products because these are the things that you want. We give a shit about our customers. That’s the way it should be with every business. I’ve never seen a business success that doesn’t care about the customers. Although some have in my industry, which is kind of crazy, but eventually that’s going to end because you’ve got to put up or shut up. You could have great marketing packages and say this person is the greatest in the world and all this stuff. At the end of the day, people are going to subscribe and get behind that paywall. They’re going to see who you are and you better make sure you’re good or you going to lose those people.
For us, we want to get as many people in because we know once they do and they get to see our brand, they’re going to be happy with all the products and all of our analysts because I vet these people personally and, really, really excited going to watch a lot of new products for you guys. So really busy on our end. Great stuff in the works for you guys. And that’s it for me. I was serious, dead serious about the Twitter. I’m going post that ugly picture of my 12-centimeter incision if you’re interested in Twitter, my handle is @FrankCurzio.
I know a lot of you already follow me on Twitter, and just, it’s just really cool. But at 8:00 PM, I set my alarm. I’m going to do that today, so make sure you guys, if you’re interested in seeing it, take a look at it. And for those that don’t follow me on Twitter and are just going to click at the file I made to see the pic, I’m sure you’re going to be impressed because on Twitter I don’t hold back. I debate everyone, a lot of analysts who are on there saying stupid crap. So, I share a lot of original content I see on the sell side, which I get tons of sell-side research. Most mom-and-pop investors, individual investors don’t have access to this really, really cool research and I’ll share a lot of facts, figures and stuff like that, but I really have fun with my Twitter. It’s a fun platform, it’s a no BS platform, and you’ll see a lot of debates and a lot of fun stuff so it will definitely be entertaining.
So thanks so much for listening. Really appreciate all the nice emails in regards to my hip surgery. Thanks so much guys. I love you. All’s okay, feeling great. I’ll see you guys in seven days. Take care.
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Editor’s note: Every week on this podcast, Frank interviews some of the brightest minds on Wall Street. The following day, he sends a stock tip based on his conversation to subscribers of The Dollar Stock Club. Sign up today… and receive Frank’s favorite tip from today’s guest in your inbox tomorrow.