Strategy · Event-Driven

SPINOFF INVESTING

BullishUndefined riskAdvanced

Overview

Buy newly spun-off subsidiaries from large parent companies. Systematic forced-selling by index funds creates initial discounts, with documented outperformance over 3-year holding periods.

Setup

1.Track upcoming spinoff announcements via SEC filings or specialized newsletters.
2.Wait until 2-4 weeks after the spin date for forced-selling pressure to clear.
3.Buy at the post-spin lows; verify the spin-off has standalone fundamentals.
4.Hold 18-36 months — outperformance window is multi-year.
5.Diversify across 10-20 spins to capture the statistical edge.
6.Exit on price targets or thesis breaks.

Max profit

Historical studies show 10-15%+ annualized excess returns on spinoff baskets.

Max loss

Single-name downside; basket reduces idiosyncratic risk.

Breakeven

Outperforming a passive index over the holding period.

When to use

When you can dedicate research time to fundamentally analyze each spin.

When to avoid

Without diversification — single-spin bets carry significant idiosyncratic risk.