Saturday, November 3, 2007

Spinoffs

These jewels usually occur when a parent company separates a subsidiary into an independent company via a stock dividend. According to a Penn State study covering 25 years of data* "stocks of spinoff companies outperformed their industry peers and the Standard & Poor's 500 by about 10% per year in their first three-years of independence.**"

Keys to look for when picking spinoffs:

  • High insider ownership in new business
  • Forced selling from institutions
  • An uncovered great business


That said, here are two spinoffs that quietly happened last week:

Peabody Energy completes spinoff of Patriot Coal


Acuity Brands spins off chemical business


*Patrick J. Cusatis, et al., "Restructuring Through Spinoffs," Journal of Financial Economics 33 (1993)
**Joel Greenblatt, "You Can Be A Stock Market Genius" (1997)

1 comment:

Tucker said...

Do you publish performance data of your recommendations?