Activists’ Secret to Unlocking Value Falls Flat in Stock Market / The Edge Group Reveals Early Intelligence Helps Improve Your Alpha
Nov 27, 2015
By staff writers Dani Burger and Lu Wang at Bloomberg, NYC: Returns for spinoff stocks are trailing the S&P 500 in 2015. From Carl Icahn to Barry Rosenstein, activists are in love with spinoffs as a way of unlocking stock market value. At the moment, they’re not working. “We’re seeing more of these forced company spinoffs,” said Jonathan Morgan, an analyst for Edge Consulting Group LLC, a Morristown, New Jersey-based research firm that analyzes spinoffs and special situations. “Because companies are doing poorly, there are more activists, and more activists forcing spinoffs, moving further away from value spins.”
“They’re not going out of fashion, and everyone is going to continue to focus on them. But it’s not the case anymore that you can do a blanket investment of spinoffs in the market,” Morgan said. “Hedge funds have to earn a buck for clients, especially activists. It’s affecting the quality.” Emerson Electric Co. and RR Donnelley & Sons Co. are among American stocks that have declined an average of 1.1 percent in the month after announcing the actions this year — the first negative return for that group since 2007, according to data compiled by Bloomberg. Companies from Chemours Co. to Talen Energy Corp. that have been carved out of corporate parents and handed to shareholders as separate securities are down 2.3 percent in 2015, trailing the Standard & Poor’s 500 Index.
Vista Outdoor Inc., a sports and recreation company, and Cable One Inc., a former unit of Graham Holdings Co., are among this year’s winners, climbing at least 8 percent. The Edge sees 3 more situations substantial value next year, like…