The year is coming to an end and it’s really cold outside. Warm up and start your weekend with a few spinoff related links:
- The always excellent Value and Opportunity took a close look at the recent spinoff of Italian gas distributor Italgas (IG.MI) from SNAM spa (SNMRF). In his opinion, although there is real risk in the name, the valuation offers upside and the macro environment was a bit too negative for his liking. It’s worth reading the full piece, but in short, he thinks it’s an interesting opportunity and actually put money to work in the name by initiating a small position. Although we try to hit on everything, we don’t always end up covering every European or foreign demerger (thats what they call spinoffs over there) – glad there are some others looking at them. For another example, he also covered E.On’s (EONGY) widely panned spinoff of Uniper, its ‘bad asset’ portfolio.
- In addition to being cold outside, year end also means it’s time to reflect on (and draw poor conclusions from?) 2016 performance numbers. Although a bit premature, ETF Trends notes that the two spinoff focused ETFs have done pretty well this year, with both outperforming the broader S&P 500 index. Guggenheim’s CSD ETF (which switched from tracking the Beacon Index to the S&P US Spinoff Index earlier this year) is up 16% YTD and VanEck’s SPUN, which tracks Horizon Kinetics’ Global Spinoff Index, is up 23.9% vs. the S&P’s 12.1%. They might regret publishing this though if the next two weeks end up brutal for spinoffs. The truth is, given the composition of the two funds (which include small cap names and SPUN’s global names), it’s worth questioning whether or not the S&P 500 is really the best benchmark. On that note, it’s really quite interesting to see how different the two portfolios are despite both containing only spinoffs and parents. That is probably worth exploring in more depth in its own piece though.
Disclosure: Author holds no position in any stock mentioned.