Spinoff Stock Research — Halted

Spinoff & Reorg Profiles was a monthly spin-off research report for traditional value investors. Publication stopped in November 2014.


We believe Spinoff & Reorg yielded as many actionable ideas as a good captive analyst, but at over 100 times lower cost. Most Spinoff & Reorg readers were analysts or principals at hedge funds; we augmented their in-house analytical teams with a steady flow of unexpected ideas.

All the taste, half the calories

Some securities research reports appear to value themselves by volume. We pursued the opposite. Reports were typically 8 pages — not 40 — because we left out the usual filler, such as extrapolated earnings forecasts, and extensive cut-and-paste from public filings. The result was a nutritionally dense core of unusual ideas, all but invisible to the major data feeds, and pre-screened to fit traditional value investing criteria.


Spinoff situations vary widely in quality, so we never recommended them carelessly or blindly. Instead, our ideas changed flexibly with conditions.

For example, our May 2, 2013 issue recommended not a distribution-type spinoff, but instead an IPO carveout of insurance firm ING U.S. (NYSE:VOYA). We almost never recommend promoted offerings, because they are generally too overpriced to qualify as value investments; yet in this case, we were first in the nation to release a positive analyst report on VOYA, within hours after it listed. Why? It was cheap.

As soon as VOYA listed, we knew our readers could buy a profitable, reasonably stable insurer and pension manager for less than half of tangible book value. Within 3 months of our recommendation, shares were up over 50%. Within 15 months, shares were up over 90%, yet still traded at less than 8 times earnings.

As another example, our July 2012 monthly recommendation was not a spinoff, but a canceled spinoff. Shares of insurer Old Republic International (ORI) had plummeted to barely half of tangible book value after it gave up plans to spin off a failing mortgage insurance subsidiary. Speculators, who had bought blindly on the prospect of a spinoff, were hammered on the cancellation. It was here that we saw an entry point.

Investors were fleeing perceived holding-company-level exposure to the subsidiary, but we found this fear was unsubstantiated. Moreover, the CEO himself was the largest non-institutional ORI shareholder, with most of his net worth in ORI shares, most of his personal income coming from ORI dividends, and a consistent history of open-market purchases in ORI.

We recommended buying. ORI shares were up almost 70% in the next nine months.

This was a natural result of our tactical flexibility (buy what makes sense right now) and philosophical inflexibility (only buy good, cheap companies).

Thoughtful heresy

Our pick of the month for the January 2011 issue was Farmers National Bancorp (FMNB).  Superficially, this looked like a post-bubble community bank in the middle of the Rust Belt — what could be more toxic?  But on scratching the surface we found it was located in a rural pocket of Ohio where residential prices had actually gone up since the real estate crisis began.  FMNB was profitable, growing, diversified into asset management, and had passed the gallstone of bubble-era writedowns.  Insiders were buying heavily through a rights offering structured to discourage outsiders.  Most important, FMNB was wildly underpriced relative to tangible book value.

FMNB was up 22% after 6 months, and over 80% after 14 months.

Spinoff & Reorg offers an alternative by introducing a new data set. Fresh spinoffs, their parent companies, and many other situations on which we report, have undergone capital structure changes so recently that Capital IQ and its competitors tend initially to report their financials incorrectly or not at all. This can create a temporary window of inefficient pricing, visible to our subscribers.

Global and obscure, but US-traded

Did you follow Compagnie Financiere Richemont in 2008, or Barloworld in 2007, or Husqvarna in 2006? All three are foreign midcap spinoffs or parents thereof, obscure in the US but listed on the Pink Sheets, and all enjoyed relatively obvious windows of low price within a few months after listing.

Spinoff & Reorg covered all three, and many more. In addition to exhaustive US coverage, we offered ideas far afield of the usual suspects.

Try it with no further commitment

We expected to earn our keep every single month. We were sufficiently sure of this, in fact, that we didn’t require an annual subscription. Readers could go month-to-month with a credit card, and cancel anytime. (Exception: due to administrative overhead, soft dollar subscriptions were annual only.)