Investing in stocks that are planning to spinoff part of its business are one of the strategies that I find the most exciting and profitable. My interest in such cases began with Joel Greenblatt: “You Can Be a Stock Market Genius”, which i have read several times on my Kindle Paperwhite, and is an excellent way to get you interested in new ways of investing.
Definition spinoff: A corporation takes a subsidiary, division, or part of its business and separates it from the parent company by creating a new independent, freestanding company.
There are fewer analysts following Nordic companies and spinoffs will often be a neglected event in most cases, and in my opinion a source for extra return. The extra profit stems from the spinoff process itself where the distribution of shares in the spun-off company is given to the wrong people. The original shareholders purchased shares in the parent company and not, for instance, in the parent company’s unrelated businesses. The result would be that the shareholders sell the stocks in the spun-off company immidiately after distribution.
Holding period: minimum two years, since the greatest return is achieved in the second year after the spinoff. The rationale is that the selling pressure from shareholders has subdued, results from the new managements initiatives has kicked in or that the spun-off company has been given the chance to be priced according to its peers.
Nordic Spinoffs: I believe that investing in Nording spinoffs will result in extra profit because there are fewer analysts following companies that spin off unrelated businesses which results in less attention and buzz. After a company is spun off the market cap may also be so low that institutional investors cannot invest in the company due to their narrow mandates.
So are there any upcoming Nordic spinoffs or other spinoffs that I find interesting?