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:
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: