Value Investing with Sven Carlin, Ph.D. on $SOLV (Nov 3, 2026)
SOLV looks cheap at a price-to-earnings ratio of 11 with stable margins and profitable operations, but its cash flows are very low versus earnings per share due to 3M transition costs and litigation fees; with spin-offs often loading debt onto the new company, the speaker finds this very complicated and sees no real value in it at the moment.
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The second interesting story is Solventum, an investment resulting from a spin-off from 3M, and there is a lot of financial engineering involved, and this and that. The price-to-earnings ratio is at 11, so it looks cheap and if 3M spins it off, there's probably some value.
Let's see. Surgical solutions, dental solutions , health information system. It looks good, stable margins, profitable.
There will still be some costs associated with the separation. Everything looks good. The guidance points to stable growth, and strong earnings per share resulting in a low price-to-earnings ratio .
Cash flows are very low compared to earnings per share, but this is still dependent on the enormous costs associated with the transition from 3M systems, litigation fees, etc.
Now they have another idea to separate health information systems because they are the most valuable, growing, and unrelated to other businesses. As we will see later, as with spin-offs , the parent company dumps a lot of debt on the spin-off company, gets the money and everyone is happy.
But in my view, all the spin-offs that are being carried out, discussed, and the like, are essentially aimed at the parent company getting rid of bad assets and dumping debts on the new company under promising pretexts, rather than being a valuable strategic investment.
Therefore, spin-offs can sometimes provide exciting investment opportunities , especially if a high-dividend-paying company spins off a growth company; All index funds and exchange-traded funds that focus on dividends are forced to sell, creating massive selling pressure that generates an investment opportunity.
Also, investors, including "freedom" investors who receive shares, sell them simply to get rid of them because they don't know how to handle them, and we saw the decline happen immediately after the split.
Now, the company has begun to recover , but there are still effects of these splits that make it difficult to assess. Of course, we are monitoring what happens to the stock after the split, after the high costs and bad ideas, and that is also a strategy of some kind.
At the moment , I find this very complicated , and I don't see any real value in what is happening.