We love special situation investing, and spin-offs fall in this category. While mergers and acquisitions can be questionable, as to value creation versus destruction, more times than not, spin-offs allow investors to invest in a more-focused and simple business. CST Brands (CST) is one such story.
A number of studies have found that spin-offs and parents tend to outperform the broader market, with the edge going to spin-offs. Patrick Cusatis, James Miles and J. Randall Woolridge's 1993 study (published in the The Journal of Financial Economics) determined that spin-offs and parents surpassed the S&P 500 by an average 30% (spin-offs) and 18% (parents) during the first three years of trading after spinning off.
Meanwhile, the Lehman...
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