I’ve just finished the chapter in Joel Greenblatts book on Spin-offs and how the canny private investor can profit from them. I did a quick google for ”spin off lse” today and noticed the Cookson group has very recently split into two new companies – Vesuvius and Alent. One is to do with steel, the other ceramics/chemicals i believe. A cursory glance is all i’ve given to this situation to see if Joel’s principles could apply in this spin off situation. The answer is that they do not. Both new companies have large market caps and so are accessible to an institutional investor. This eliminates the small investor advantge.
That’s not to say that either company may not be a good investment on its own merit, but that the opportunity inherent from a specific type of spin off can not be found here on account of the large market caps of both new companies. Never mind, at least i’m putting my new analytical skills into practice.
Interesting post. I was wondering about a good way of spotting demerger activity, and it hadn’t occurred to me to use the search you were suggesting. D’oh. Another thing to try it to go over to an RNS site like http://www.investegate.co.uk/ and do a keyword search for “demerger”. You often get false positives, but ce la vie.
I was aware of the ALNT and CKSN spinoff, and I only looked at it VERY superficially. Like you, I concluded (perhaps prematurely, admittedly) that a great opportunity didn’t present itself. There wasn’t anything that grabbed me, like an absurd valuation level, or a debt burden that could be repaid. If memory serves, there was also a run-up in the share price before the demerger, perhaps indicating that it was eagerly anticipated, rather than shrugged off.
I wonder if there are more opportunities in US stocks than in UK stocks.
Thoughts?
Yes there is so much to loko at, so many oppurtunities that i try not to dig further if a cursory look doesnt provoke me further. I am wondering how best to find these opportunities. Joel was very enthusiastic about them in his book.
I have saved these links – I plan to investigate them when i get time to see if they are any good.
http://www.stockspinoffs.com/
http://distressedreport.com/
http://www.livemint.com/Money/ZBBlo7tXgdBr9obie2XwPP/Is-Orient-Paper-stock-poised-for-a-rerating.html
http://www.rocketfinancial.com/spinoffs/
http://marketocracy.com/
http://www.valueinvestorsclub.com/value2/
I think its quite likely that posters on the MF will share if they find a spin off/merger they like.