I wanted to share a quick stock spinoff analysis.

I downloaded all the stock spinoff data that was available on Bloomberg and then analyzed total 1 year return, 3 year return and 5 year return, by market capitalization.

Here is one key takeaway: microcap spinoffs outperform in year 1. 

Specifically, “Less than $500mm Market Cap Spinoffs,” “Less than $100mm Market Cap Spinoffs,” and “Less than $50mm Market Cap Spinoffs” generated total 1 year returns of 29%, 37%, and 55%, respectively.

However, over longer time periods, the outperformance of microcap performance fades. Over longer time periods, the best-performing  spinoff market cap cohort is “Less Than $1bn” which generated 3 year and 5 year total returns of +69% and 170%, respectively.

Here are the charts:

spinoff 1 year performance by market cap

 

spinoff 3 year performance by market cap

spinoff 5 year performance by market cap

 

From the first chart above, my main takeaway is to look for stock spinoffs with market capitalization of under $100mm. After all, stocks with < $100mm market caps have historically generated a +37% total return in year one.

Want to know our current top <$100mm market cap spinoff pick?

Click the link below:

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