DowDuPont's (NYSE:DD) three-way split, years in the making, is finally upon us. In this segment of Industry Focus: Energy, Motley Fool's Nick Sciple and Fool.com contributor Lou Whiteman discuss what investors should do in the coming months as the complex corporate transactions play out.
To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. A full transcript follows the video.
This video was recorded on April 11, 2019.
Nick Sciple: OK, Lou, now that these new companies are coming onto the market in June, we'll have access to invest in all three new Dow spin-outs. How should investors think about investing in these companies once they come onto the market?
Lou Whiteman: You hit the nail on the head there with "once they come on the market." The first advice is just to let DowDuPont go right now. You go back a couple of years, I had no desire to own either Dow or DuPont. I had no desire to own the combination. And that worked out well. Last I checked, since the merger, they trailed the S&P 500 by almost 30%. Unless you really, really, right now, looking into that June split, want exposure to both an agtech company and special materials, maybe then you get in just so it's done. But there's really no reason to buy in now.
Once they go independent, just like with Dow, we'll see who's added to what index. I'm personally not going to rush into any of these businesses. I think anytime you have something that's complex, there's going to be a lot of volatility, there's going to be a lot of different investors either exiting positions or institutional people getting in. You're going to see housekeeping in the first couple of quarters. You can be off on earnings because the analysts are winging it more. If you're patient enough, you can get in and enjoy it if any of these businesses really appeal to you. But I see more harm in jumping than waiting. I'd like to look at these later in the year. Hopefully, by the end of the year, we'll know what we have, we'll know what the economy's like, we'll know what exposure they have. You have three large, interesting businesses with three different profiles that...you can get a much better handle for what they are and what their outlook looks like.
Sciple: Yeah, I agree with you, Lou. I think we need a couple of quarters to see how these strategies are going to play out. We're just getting the early kernels of what these businesses are going to do now that they're on their own. I'd really like to see a quarter or two of management really laying out to us what their vision is for the business and where they see their opportunities are going forward as an independent company.