I'm not against a Yum! Brands (YUM) spin. The opposite, in fact; I have proselytized for the break-up for ages, betting that there was a huge amount of value tied up into China that couldn't be seen by all of the other moving parts.
Today, Yum! Brands agreed. And that's my problem. After one more disappointing quarter -- a particularly surprising one -- now the company is agreeing, after pressure from activists, that the split is correct.
What made me like the split-up is that China still has strong underlying unit economics with the possibility to fully recover from $1.2 million to $1.7 million on average. But it is coming at a time of weakness, when other companies, notably Action Alert PLUS portfolio holdings Starbucks (SBUX) and Apple (AAPL), as well as Nike (NKE), are saying the opposite. Why not wait? Why not bring out the better values and then do something?
Now, one thing is true: the portfolio, away from China KFC, is pretty darned good. I only had complaints about Pizza Hut in China made worse by continued strength in the Indian business of Domino's Pizza (DPZ).
But investors should take heart. If you want a pure play on the recovery of consumption in China, you may have your chit, Yum China, being brought to you at what could be the low, not the high, of its current cycle.