Intriguing...Spinoffs: Sandisk Corporation (SNDK)

Spinoffs have a history of being great investments. Perhaps Sandisk charting its own path away from Western Digital will be the necessary move to unlock value.

Still Life with Globe, Books, Sculpture, and Other Objects, Jan van der Heyden, 1670 oil on panel (Academy of Fine Arts Vienna)

Spinoffs are an underappreciated investment. Often considered castoffs so management can focus on its core business, spinoffs can end up being the better investment. A few companies profiled here have been spinoffs that outperformed their former parent, and investors such as Peter Lynch spoke profusely about the underappreciated value in these businesses.

If spinoffs have been a source of alpha, then it would make sense to check in with companies when they do a spinoff. So, in addition to examining IPOs, I’m going to make a habit of also looking at some of the more recent spinoffs that may be flying under the radar.

Two weeks ago, memory device manufacturer Western Digital (NYSE: WDC) split itself into two. Western Digital will remain a hard disk drive memory business while it spun out its flash memory business into Sandisk Corporation (NASDAQ: SNDK).

Fortunately, both Western Digital and Sandisk have had investor day presentation since the split, so there is a little more information than what we would typically get from an IPO prospectus. So let’s dig into the split and whether Sandisk can be one of those spinoff darlings Lynch loves.

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