Spin-Offs Outperform, But Only If You Get In Early

Spin-offs are well-known as one of the situations where value can easily be found. Spin-offs offer value because they are usually underappreciated by the market. Large funds which own a stake in the parent may find themselves having to sell off the smaller spin-co as it breaches investment rules. What’s more, during the first few quarters of the spin-cos life, fundamentals tend to be difficult to understand, and the likely of a mispricing is, therefore, greater.   Value investors have long known that investing in spin-offs can generate excess returns and now there’s solid evidence to prove it. The evidence…