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:
Do you publish performance data of your recommendations?
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