What to do when you own a stock or might buy it? One thing you might want to know is if there are major changes planned for the business. For example, if the business will be split up or a portion of it will become a new company, do you still want to buy shares? In general, I am in favor of wise additions to an existing business. Also, in general, I am not a huge fan of businesses that break apart, especially if the portion that is separating was one that was acquired for “synergies” within the existing business. Stock Spinoffs is one place to learn about what is happening in the market.
I have been watching a stock with the ticker symbol KAR (KAR Auction Services, Inc.). Most consumers probably don’t know about KAR. But if you have ever bought a used car, there is a good chance it passed through KAR at some point. In 2017, the company sold approximately 5.5 million vehicles at auction. (See: https://ir.karauctionservices.com/investor-relations/default.aspx)
KAR provides used car auction and salvage auction services in the US, Canada, Mexico, and the UK. There are three segments: ADESA Auctions, IAA, and AFC. ADESA offers whole car auctions and related services to the vehicle remarketing industry through online auctions and auction facilities. The IAA segment offers various loss solutions and salvage vehicle auction services that facilitate the remarketing of vehicles for a range of sellers, including insurance companies, dealerships, rental car companies, fleet lease companies, and charitable organizations. The AFC segment offers floorplan financing, a short-term inventory-secured financing, to independent used vehicle dealers.
KAR had a recent significant drop in price. I am still watching it because I like the business model. But if there is a breakup in the future, I tend to be a bit more cautious.