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Spin-Offs: A Hidden Gem for Investors

Strategic Insights

— 2 min read

Big name spin-offs have been making headlines this year, but how can investors profit from these separations? Joining us is Mark Keeley, vice president of research at Keeley Asset Management, who shares his expertise on the subject.

Mark Keeley, a seasoned investment expert, emphasizes that spin-offs have long been an integral part of the Keeley Small Cap Value Fund's investment process. He attributes the importance of spin-offs to the fact that they often fly under the radar of investors and are tax-free divestitures to existing shareholders. These spin-offs can result in significant inefficiencies in the market, providing opportunities for investors to capitalize on undervalued companies.

A study of the past three years shows that nearly two-thirds of companies that have been spun off have beaten the S&P 500, demonstrating that spin-offs are not merely unwanted assets but rather valuable businesses with growth potential.

Mark Keeley highlights the case of Hains Brands, a spin-off that has shown impressive performance, and expresses enthusiasm for Idearc, a spin-off of Verizon that has the potential to trade on the market. He also mentions Kellogg Brown & Root, the spin-off of Halliburton, as a promising business with a focus on construction, consulting, and other services.

Keeley forecasts that the health care industry will undergo significant changes in the coming years, leading to a surge in spin-offs and divestitures from larger health care companies.

Key Takeaways:

  • Spin-offs have been an essential part of the Keeley Small Cap Value Fund's investment process for many years.
  • Nearly two-thirds of companies that have been spun off over the past three years have beaten the S&P 500, indicating that spin-offs are valuable businesses with growth potential.
  • Spin-offs are often overlooked by investors and can result in significant inefficiencies in the market.
  • Idearc, a spin-off of Verizon, has the potential to trade on the market, offering investors an attractive opportunity.
  • Kellogg Brown & Root, the spin-off of Halliburton, is a promising business with a focus on construction, consulting, and other services.
  • The health care industry will undergo significant changes in the coming years, leading to a surge in spin-offs and divestitures from larger health care companies.

Statistics:

  • Nearly two-thirds of companies that have been spun off over the past three years have beaten the S&P 500.
  • The Keeley Small Cap Value Fund has been investing in spin-offs for many years.
  • Idearc, a spin-off of Verizon, is expected to trade on the market in the near future.

Sources:

  • CNBC/DOW JONES BUSINESS VIDEO ANALYST INTERVIEW ERION BURNETT, CNBC ANCHOR
  • Mark Keeley, vice president of research at Keeley Asset Management
  • Voxant, Inc. (www.voxant.com)
  • CNBC/Dow Jones Desktop Video, LLC.

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