Reasons to Like the Spin-Off ETF

Corporate spinoffs remain a popular methods for companies looking to unlock shareholder value. This year is likely to be an even larger year for spinoffs than 2014. As of early January, there were already 41 spinoffs planned compared to 36 at the same time in 2014, according to Spin-Off Research.

“Last year, 60 new companies were born via spins, the highest number since 2000, according to Spin-Off Research, an independent firm (see chart nearby). The boom is likely to continue: 46 companies have already announced spinoffs for 2015, and the firm expects a total of 50 to 55 before the end of the year,” reports Alexander Eule for Barron’s.

Spinoff is helping the Guggenheim Spin-Off ETF (NYSEArca: CSD) regain its status as an out-performer of broad market benchmarks. CSD had a disappointing 2014. The ETF returned just 1.1% last year while the S&P 500 jumped 13.5%.

Last year was the second time since 2008 that CSD has trailed the benchmark U.S. index and when CSD beats the broader market, it usually does so by wide margins. For example, the ETF rose 52.1% last year while the S&P 500 gained 32.3%. In 2012, CSD surged 26.4% compared to a 16% gain for the S&P 500. [Rough Year for the Spin-Off ETF]

CSD is up to its old tricks again. Year-to-date, the ETF is up 9.1%, or more than quadruple the 2.1% gained by the S&P 500, and there could be more to come for the $544.9 million ETF.

Barron’s highlighted Citizens Financial Group (NYSE: CFG), KLX Inc. (NasdaqGS: KLXI), ADT (NYSE: ADT), Lands End (NasdaqGS: LE), Post Holdings (NYSE: POST), Time (NYSE: TIME) and Alent and as spinoffs that could deliver solid returns this year.
Cereal maker Post is a former CSD holding while ADT and Lands End currently combine for just over 6% of the ETF’s weight.