Spinoff will unlock value

Article Excerpt

We’ve had great success over the years in picking stocks with underappreciated assets. ConAgra, a long-time favourite, is a prime example. It has just handed out shares in its Lamb Weston subsidiary to its investors. Parents and spinoffs tend to outperform comparable stocks. We think these two will as well. CONAGRA BRANDS INC. $37 (New York symbol CAG; Income Portfolio, Consumer sector; Shares outstanding: 438.7 million; Market cap: $16.2 billion; Price-to-sales ratio: 1.4; Dividend yield: 2.2%; TSINetwork Rating: Above Average; www.conagrabrands.com) is the new name for ConAgra Foods following the spinoff of Lamb Weston (see below). Investors received one Lamb Weston share for every three ConAgra ones they held. Conagra’s products include Chef Boyardee pasta, Hunt’s tomato sauce, Peter Pan peanut butter and Orville Redenbacher popcorn. The new firm aims to pay 45% to 50% of its earnings as dividends. The implied annual rate of $0.80 a share yields 2.2%. Conagra Brands is a buy. LAMB WESTON HOLDINGS INC. $33 (New York symbol LW, Income…