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Data Just In: Spinoffs Beat The Market

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Data Just In: Spinoffs Beat The Market

  • Cantor Fitzgerald research has shown that spinoffs outperform the broad market in their first year of trading.
  • The best time to buy spinoffs is typically within the first week of trading.
  • Parent companies enjoy spin-off benefits, including higher margins, larger growth and higher multiples.
  • In a new report, Cantor Fitzgerald analyst Steve Ferazani took a close look at spinoffs and ran through the numbers on their historical performance. Ferazani found that spinoffs typically outperform the market by a wide margin in their first year of trading.

    What’s Going On?

    According to the report, spinoffs completed between 2009 and 2013 outperformed the S&P 500 in their first year of trading by an average of more than 17 percent. Ferazani identified several factors that seem to be contributing to this outperformance.

    Related Link: Your Madison Square Garden Spinoff Cheat Sheet

    “These factors include spin-off exclusion from the S&P 500, the ability and willingness of the spin-off company’s board and management to repurchase shares, and users of the cash contribution from the spin-off to the parent,” he explained.

    Buying The Dip

    For investors looking for the best possible time to buy spinoffs, look no further than their first week of trading. Ferazani found that more than 62 percent of spinoffs trade down during their first six trading days.

    Outlook

    Cantor Fitzgerald believes that 2015 may be mark the peak for tax-free spinoffs, but it does not expect a dramatic reduction coming in 2016. Too many companies recognize the potential benefits of a spinoff from the parent company, including higher margins, better growth and a higher multiple.

    For traders looking for spinoff-related stocks to play, Cantor Fitzgerald has Buy ratings on Barnes & Noble, Inc. (NYSE: BKS), Gannett Co Inc (NYSE: GCI), KLX Inc (NASDAQ: KLXI) and MSG Networks Inc (NYSE: MSG).

    Disclosure: The author holds no position in the stocks mentioned.

    Image Credit: Public Domain

    Latest Ratings for BKS

    DateFirmActionFromTo
    Jun 2019Gabelli & Co.DowngradesBuyHold
    Jun 2019Craig-HallumDowngradesBuyHold
    Dec 2018Craig-HallumUpgradesHoldBuy

    View More Analyst Ratings for BKS
    View the Latest Analyst Ratings

     

    Related Articles (BKS + GCI)

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