Imagine getting free “premarket” shares in a great company? Well, that was the theme of Charles Mizrahi’s latest Banyan Hill presentation with Corrina Sullivan.
According to the presentation, “more than a billion dollars of a brand-new stock was deposited into accounts all over America” in 2015, without investors having to buy a single share. And apparently, it’s “about to happen again.”
What’s it all about?
Charles Mizrahi’s pitch is about investing in companies that are planning on “spinning off” a portion of their operations into a new company, handing investors new shares in the process. And he teased one “healthcare spinoff” in the video, which he reveals in a report called “The Mega Spinoff” that comes with a $1,995 subscription to Catalyst Fortunes.
The clues he shared in the video were very limited, so I can’t say for sure what stock he’s teasing. But I do have some ideas as to what it could be. I’ve also looked into his spinoff strategy and Catalyst Fortunes service, and in this post, I’ll show you what I found.
What Is Charles Mizrahi’s “Spinoff” Strategy?
The way Charles Mizrahi’s “spinoff” strategy was framed in the presentation was more or less that you can get free “premarket” shares by investing in certain companies at the right time, which he suggests could turn out to be a lucrative investment.
What does Mizrahi mean by “premarket shares?”
Well, one way some investors get shares before the stock is listed is through a pre-IPO deal, but these are reserved for accredited investors and institutions. Another way is by investing in equity crowdfunding deals, which are open to everyday investors.
But Charles Mizrahi wasn’t talking about either of these, and he clarified that he was not talking about investing in IPOs because he believes “they are a bad investment.”
So, if that’s the case… what is he talking about?
Charles Mizrahi is talking about spinoffs.
“When these premarket stocks get listed, they are called ‘spinoffs.'”
What’s that? A spinoff is created when a company turns an existing part of its operations into a new entity and issues stock in it to shareholders of the parent company.
So, for example, if you own 50 shares of the parent company and it spins off, you get 50 shares of the newly formed company when it starts trading under a new ticker.
Why do companies do this?
The Investopedia article I just linked says there are several reasons companies spin-off, which are grounded in increasing the company’s financial return. And Mizrahi suggests that large companies do it to become more nimble and unlock shareholder value.
“Every day they get outpaced by smaller companies. Big companies are like turning an aircraft carrier … they do it very slowly. Smaller companies are more responsive to the market and are able to turn on a dime. So big companies are spinning off divisions to unlock shareholder value.”
What does he mean by “unlock shareholder value?”
In short, Charles Mizrahi is referring to how, as a shareholder in the parent company, you essentially get shares in the spinoff company for free.
“So, to unlock the value in the division, here’s what they do…
The company spins off the division as an independent company and distributes shares to shareholders.
Now the division is grown up … it has its own share price, name, ticker symbol. It operates as an independent business.
And if you bought the parent company’s shares before the spin, guess what … you get shares in the spinoff for free.”
How does it work? Precisely how the new shares are issued by the parent company depends on the plan it has in place, which is announced in advance. But according to Mizrahi, spinoff shares are deposited into an investor’s brokerage account.
“They are distributed to investors and deposited into their brokerage accounts according to a plan that the company releases in advance.”
Are spinoffs a good idea?
I recommend doing your own research on this topic because there are many factors that go into spinoffs. And like any investment, there are risks involved. So it’s not like you’re just getting free shares in a way that’s guaranteed to make you money.
Unfortunately, nothing is ever that simple. But Charles Mizrahi suggests that these investments have outperformed the market and showed some examples of different spinoff stocks he’s recommended to his followers in the past.
“… study after study has shown that once they are listed, these stocks tend to outperform the market over the long-term.”
“And 3-to-1 is just the average … many end up outperforming the market by six, eight or ten times the market average.”
I haven’t been able to find anything to verify the “3-to-1” figure he mentioned in the presentation, but I did manage to find one of the studies on spinoffs he cited.
And according to Investopedia:
“Historically, spinoffs have been good for investors. On average, both the parent company and the subsidiary outperform the market during the 24-month period following a spin off.”Source: https://www.investopedia.com/ask/answers/032415/how-do-spinoffs-impact-investors-both-parent-and-subsidiary-companies.asp
Of course, there’s no guarantee you’ll make money with a spinoff or by following Charles Mizrahi’s recommendations. And the above article also mentions some of the risks, too.
For example, shares in the parent company could dip after a spinoff since a chunk of the company’s assets now belongs to a separate entity. And not everyone who receives shares of the spinoff itself will want them, so this can lead to initial selling pressure.
Nevertheless, that’s the gist of the strategy Charles Mizrahi pitched in the presentation. And according to Mizrahi, there’s one “healthcare spinoff” he’s tracking in particular.
What “Healthcare Spinoff” Is Mizrahi Pitching?
As mentioned at the outset, Charles Mizrahi didn’t reveal his “healthcare spinoff” stock pick in the presentation, nor did he provide many clues about it.
Here’s a summary of his clues:
“I have identified one of these situations — an upcoming premarket stock — that I’ll share with you today.
This company has had some impressive growth this year and is checking all the boxes for a great buy … and millions of shares are due to be deposited into investor accounts in a matter of weeks.”
“And if you invest in a spinoff in the healthcare industry, the world’s your oyster. AND you get these shares free. They just appear in your account.
I’ve put the details of the one healthcare spinoff I’m tracking in a report called The Mega Spinoff. It’s free when you join Catalyst Fortunes and I want to share it with your audience today.”
As you can see, the only tangible clue he shared was essentially that he’s tracking an upcoming healthcare-related spinoff, which isn’t much to go off.
However, he did mention in the presentation that one of the primary benefits of spinning off is that the smaller company that spins off can be “more responsive to the market.” So, perhaps it’s a stretch, but I’m willing to bet he’s teasing a larger company here.
Long story short, I researched different healthcare-related spinoffs that could happen within the next year or so, and the following popped up as potential spinoffs:
- Johnson & Johnson (source: cnbc.com)
- General Electric (source: bizjournals.com)
- Encompass Health (source: homehealthcarenews.com)
That’s not even close to an exhaustive list of all the possibilities. But these are the main companies I came across while researching Mizrahi’s clues.
Which one could it be?
In reality, it could be any of the above companies or none of them. But if I had to take a wild stab in the dark, so to speak, my guess would be General Electric.
Why? Because aside from matching the clues we’ve discussed so far, the name of the report (The Mega Spinoff) might, in and of itself, be another clue.
How so? Well, GE plans to form three public companies focused on the healthcare, aviation, and energy sectors. So if GE is Mizrahi’s pick, which is a big IF, then this might explain why he’s dubbed it a “Mega” spinoff, given it involves multiple spinoffs from one stock.
I’ll be the first to admit that this theory is a long shot (lol). I could easily be wrong on this one. But that’s my best guess. And by all means, if you have any ideas, feel free to hit me up in the comments section below. I’d love to hear your thoughts!
In any case, regardless of which company Mizrahi is teasing, it’s worth noting that not all spinoffs are the same. What I explained earlier is generally how these work, but it all depends on the individual company. So I recommend doing your own due diligence.
And either way, if you want to find out what company Mizrahi is teasing and get all of his research on it, the best option would be to see his report titled “The Mega Spinoff.”
The only “catch” is that to access that report, you need to join Catalyst Fortunes, and at $1,995 for a year, it’s not exactly cheap. But let’s take a look at how it works in case you are considering joining. That way, you will have a better idea of what it’s about.
Recommended: Go here to see my #1 rated stock advisory of 2022
Overview of Catalyst Fortunes
Catalyst Fortunes is a Banyan Hill Publishing stock advisory run by investment guru Charles Mizrahi. According to the Banyan Hill website, the service is built on the “Alpha-3 Approach,” which Mizrahi describes as his “tried-and-true stock-picking approach.”
However, what’s different about Catalyst Fortunes is that Mizrahi says he also looks to see if there are any “extra catalysts” surrounding the company that could make its stock “soar into the stratosphere.”
What sort of catalyst?
According to Charles Mizrahi, while “other situations exist,” spinoffs are what he predominately tracks in Catalyst Fortunes. And some of the “other situations” he mentioned include “insider buying,” “misunderstood stocks,” and “under-the-radar stocks.”
“I’m looking only for companies that are set to experience a predictable event that will drive the stock price higher.
The spinoffs you just heard about are one type of catalyst event.
To find tomorrow’s biggest gainers today, I seek out the stories that aren’t being told yet … the companies the financial media is ignoring … the opportunities Mr. Market doesn’t want you to know about.
Spinoffs … insider buying … misunderstood stocks and under-the-radar stocks. Bitchin opportunities in all of these.”
How does the service work?
The main component of the service is getting Charles Mizrahi’s stock picks.
According to the presentation, he sends out one recommendation per month on average. So over a 12-month subscription, he shares around 12 stock ideas on average.
The way it works is pretty straightforward. Once Mizrahi finds a stock he’s bullish on; he sends subscribers a “trade alert” detailing his pick and explaining how to buy it. He also sends out alerts when it’s time to sell the parent company and spinoff.
Here’s how he explains the process:
“Right. So here’s the plan.
When they subscribe to Catalyst Fortunes, they can expect to receive four alerts about this opportunity.
I’m going to send out alert No. 1 when the exact spinoff date is announced … so my readers can buy up shares in the parent company.
Alert No. 2 is going to go out on the day the spinoff happens, just to make sure every single one of my readers knows about it.
Alert No. 3 will come when it’s time to sell the parent company…
And eventually … and this could be months or years in the future … alert No. 4 will tell them when it’s time to sell the spinoff.”
Aside from stock picks, subscribers also receive research reports, access to the model portfolio, weekly updates, and guides on following Mizrahi’s strategy.
How much does all this cost?
Catalyst Fortunes costs $1,995 for a 12-month subscription. And it automatically renews at this same rate, according to the company website. However, this seems like promo pricing, so it could cost more depending on where you join.
Is Catalyst Fortunes legit and worth it?
I haven’t joined Catalyst Fortunes, so I can’t say for sure if it’s legit and worthwhile. And as with any service, there’s no guarantee you’ll make money as a subscriber.
However, I don’t believe it’s a scam. Charles Mizrahi is well-known in the stock advisory space and runs multiple Banyan Hill services, so I doubt he’s scamming people.
That said, it’s still possible you could lose money following his stock ideas, which is true for any service. And according to the Banyan Hill website, this service doesn’t come with a cash refund. So there are risks to consider before jumping in.
Who Is Charles Mizrahi?
Charles Mizrahi is a former Wall Street trader who, according to his Banyan Hill Publishing profile page, has 40 years of experience in finance and has worked for investment banks, including The Goldman Sachs Group, Citigroup, and Credit Suisse.
Today, Mizrahi shares his stock tips and research through the various Banyan Hill stock advisories he runs. His flagship service is called Alpha Investor, but he also runs Microcap Fortunes and Catalyst Fortunes, which are both higher-priced services.
He also runs a free email newsletter called Real Talk. And as a side note, he once ran a service called Lifetime Profits which appears to have been closed. And from what I can tell, Catalyst Fortunes may have been the service that replaced it.
Aside from his stock advisory services, Mizrahi has released many stock teasers over the years, some of which I’ve written about on this blog.
For instance, I recently wrote about his “Super Stocks Project.” And before that, I wrote about his “forever battery” stock pick, a 3D printing company he teased, and an autonomous vehicle company he was bullish on. Check out this page for all the details.
The “premarket shares” (AKA spinoff shares) Charles Mizrahi discussed in the Banyan Hill presentation relate to when a company forms a new entity from part of its existing operations and issues shareholders of the parent company shares of the spinoff.
It’s unclear what “healthcare spinoff” company he’s teasing in the presentation, but the clues he shared have led me to a few possibilities, one of which is GE.
Either way, if you want to find out what company he’s recommending, the simplest thing would be to see “The Mega Spinoff” report that comes with Catalyst Fortunes.
Whatever you decide from here, I hope this has been helpful. And I’m keen to hear your take on what this one could be, so if you have any thoughts, chime in below.