Stock Spinoffs

Murphy Oil Will Remain In The S&P 500 While Murphy USA Will Enter S&P MidCap 400

Spin Doctor
Murphy Oil (MUR) is currently a member of the S&P 500 and will remain so even after the spinoff of its retail business, Murphy USA. The new company will end up a little further down the chain though and will replace Strayer Education (STRA) in the S&P MidCap 400 index upon completion of the spin. Strayer will be booted to the S&P Small Cap 600 as the company’s market cap is ‘more representative of the small cap market space’. As the final piece of this puzzle, poor STR Holdings (STRI) will get dropped from the S&P Small Cap 600 entirely as it was ranked #600. The spinoff and associated moves are expected to be completed on August 30, 2013 and Murphy USA will trade on the NYSE under the ticker ‘MUSA’.

In You Can Be  A Stock Market Genius, Joel Greenblatt takes note of the ‘forced selling’ phenomenon often witnessed post spinoff. The smaller company often ends up in a different index than the parent (as is the case with Murphy) and as a result, institutional investors bound by investment mandates need to dump the shares. This can create artificial downward pressure on the prices and provide attractive entry prices. Depending on what is spun off, sometimes even the parent company will move as well. With the growth in ETFs and other benchmark-following investors, it’s important to at least monitor these changes and keep them in mind when considering entry.

Disclosure: Author holds no position in any stock mentioned.

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