Stocks that have been spun off from larger corporate parents stand out as some of this year’s most consistent winners. So far in 2024, some 15 companies have completed spinoffs, with the General Electric aviation and energy split being among the notable. Shares of GE Vernova have rallied more than 23% since they started trading in late March. The S & P 500 is higher by almost 9% in 2024 but down a little more than 1% in the second quarter. Other opportunities for investors to participate in spinoffs will be coming soon. Nineteen more companies are scheduled to complete spinoffs this year, according to Morgan Stanley. “Spin-offs present investors with a unique opportunity to capitalize on unlocked and potentially underappreciated value,” Morgan Stanley strategist Todd Castagno wrote in a report this week. The Wall Street bank previously found that spinoffs beat the broader market by more than 2% two years after the split, whereas parent companies underperformed by 8.1%. To be sure, not all spinoffs are automatic winners. If a company spins off a company in a different sector, the new stock tends to outperform because it’s likely undervalued. Conversely, a split off in the same industry may be a sign the parent company is trying to unload underperforming assets. A cheap valuation also may not indicate a good deal. Wolfe Research previously found that spinoffs with higher valuations have trended better — meaning a higher valuation may be an indication of the stock’s quality. Winners and upcoming beneficiaries Roth MKM also recently highlighted spinoff stocks’ outperformance over the past year. GE Vernova is one of its current favorite spinoff stocks — which the company said to “buy buy buy.” Industrial company Esab , a Swedish-American company that makes welding and cutting equipment, is another spinoff beneficiary, according to Roth MKM. Esab completed its split from Enovis in April 2022. Roth MKM advises investors to buy the stock on pullbacks. Year to date, shares have rallied almost 28%. Paper producer Sylvamo is another stocks where investors should “join the momentum,” according to Roth MKM. Headquartered in Memphis but with large operations in Latin America, Sylvamo has surged more than 34% in 2024. Sylvamo completed its separation from International Paper in October 2021. Veralto is a more recent spinoff, having separated from former parent Danaher last October. The stock shows a “strong young chart,” according to Roth MKM’s chief market…
Click Here to Read the Full Original Article at Investing…
