Question: You once wrote about tracking stocks. Are there any still available? I haven't seen mention of them recently.

Sam Gates

Answer:

Dear Mr. Gates,

You're right. Tracking stocks, which allowed investors to buy a portion of a company's business, were very popular during the boom days of the dot.com business. That was in the late 1990s. However, these days they're almost toast on Wall Street.

According to Spin-Off Advisors, there are only 5 tracking stocks left -- that's out of about 38 that have been issued since 1984. During the era when stocks of small, high tech startup companies took off like a rocket and rose in price astronomically, larger companies, such as Disney and Sony, wanted part of the action. They took their Internet and telecom divisions and turned them into tracking stocks, hoping to catch the wave.

In other words, tracking stocks were issued by a parent company to create a financial vehicle to track the performance of a particular division or subsidiary.

For the most part, however, the strategy did not work particularly well because when the Internet frenzy died, no one was much interested in these sliver companies. As a group, they never equaled the overall gains made in the market. Individually, some did outperform the S&P 500.

Simplicity Is In

I think since the collapse of Enron (and the subsequent suspicions about the finances of large companies), investors have been shying away from complicated offerings. Most do not want to own anything convoluted, that is not straight forward, and that they do not understand. This more cautious approach certainly doesn't make room for tracking stocks.

Investigate

That doesn't mean the remaining tracking stocks are unacceptable. That's a judgment call you will need to make -- by studying their price fluctuations, the business they are in and how well they are managed. These factors will help you decide if they should be in your portfolio.

The 5 remaining tracking stocks are, in alphabetical order, Acacia Technologies, Applied Biosystems, Carolina Group, CombiMatrix and Celera Genomics.

This listing is not in any way a recommendation. It is provided solely to answer your question.

More Information

• Spin-Off Advisors, a for profit company, provides information on these and spin-off stocks at: www.spinoffadvisors.com.
  
  
• The Securities & Exchange Commission describes the registration process for tracking stocks as well as the basic facts. The article, at www.sec.gov/answers/track.htm, was revised in September 2004.

BUYandHOLD does not recommend any securities. The securities mentioned above are being used for illustrative purposes only and should not be regarded as an offer to sell or as a solicitation of an offer to buy.