By Jacob Sonenshine
The market's recent recovery leaves fewer bargains for those looking to buy stocks. That's where Wolfe Research's list of "special situation" stocks comes in.
Those are companies facing wholesale changes that can boost their share prices. They're often companies going up for sale. They can be companies looking to sell a specific asset, or firms with an activist investor accumulating a large enough stake to make major changes, such as C-suite shake-ups or strategic business overhauls.
Those are the types of stocks that could come in handy right now, since so many across the market are running out of steam after seeing major rallies.
The S&P 500 is up 8%, inclusive of most of its sectors, from a late March bottom amid the Iran war. A couple of trading days featured more than 2% gains for the index, as the market priced in lower oil from the partial opening of the Strait of Hormuz, and the positive economic consequences it brings. But Thursday and Friday, the index was up only a few tenths of a percentage point, a sign that the positive news is mostly reflected in the market already.
Now, a strong economy and lower inflation expectations beyond the next few months can only go so far in lifting stocks.
That's why we're highlighting the list of special situations from Chris Senyek, Wolfe Research's chief investment strategist.
A few companies looking to complete asset sales are Sonoco Products, Telephone & Data Systems, Ziff Davis, Teleflex, and TriMas. These companies could see their stocks benefit as they sell parts of their businesses and use the proceeds to buy back more shares or pay down debt, better positioning them to invest in areas with greater potential.
A couple of firms undergoing strategic business reviews are Alkami Technology and Atkore.
Some companies, meanwhile, are expected to complete spin offs. The $15 billion market capitalization Genuine Parts aims to separate into two entities, auto parts and industrial parts, in early 2027. The $20 billion International Paper wants to spin off its European business by the first quarter of 2027 to refocus on North America. Madison Square Garden might split the New York Knicks and New York Rangers into separate companies. It hasn't communicated a time line.
Spin offs often work for stocks. The new entities, on average, saw their stocks outperform the S&P 500 by a little over 10 percentage points for the 500 days after a transaction close from 1999 through 2024, according to Trivariate Research.
That's the type of gain that can get investors excited even before the transaction closes. They'll buy up stock in the initial, single company, anticipating the spinoff will unlock value in what will become disparate and separately traded entities. DuPont de Nemours stock, for example, gained 27% from the start of 2025 to just after it closed a spin in early November that year, beating the S&P 500's 13% rise in that stretch.
Elsewhere, companies that have activist investors include Bill Holdings, Clear Channel Outdoor, Tripadvisor, and Lamb Weston. Hedge fund Jana Partners reportedly has built up a more than 5% stake in Lamb Weston.
The $5.9 billion Lamb Weston's stock is down 34% in the past five years, as the maker of french fries and hash browns has sometimes missed earnings estimates by double digit percentages and recently issued disappointing guidance. Now, it has analysts forecasting a mild drop in sales this year to $6.43 billion, according to FactSet.
So why buy? It's "a higher quality asset materially under-earning with self-help and/or acquisition by a strategic acquirer as potential catalysts," write Wolfe analysts. "JANA Partners took a stake in October 2024 and is a key agent for change. We think Lamb Weston is long overdue for a shake-up at the board level and other potential management changes."
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Write to Jacob Sonenshine at jacob.sonenshine@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
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April 10, 2026 13:55 ET (17:55 GMT)
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