CSD tracks the Beacon Spin-off Index, which “defines a spin-off company as any company resulting from either of the following events: a spin-off distribution of stock of a subsidiary company by its parent company to parent company shareholders or equity ‘carve-outs’ or ‘partial initial public offerings’ in which a parent company sells a percentage of the equity of a subsidiary to public shareholders,” according to Guggenheim.
The ETF can add stocks six months after the parent company spins them out and they can remain in the fund for two years thereafter. [Changes for the Spin-Off ETF]
Another catalyst for CSD is mergers and acquisitions activity, something that was recently on full display when H.J. Heinz announced it will acquire Kraft (NasdaqGS: KRFT), currently CSD’s largest holding, to create the world’s fifth-largest food company.
Several other CSD holdings have been mentioned as potential takeover targets, including healthcare firm Mallinckrodt (NYSE: MNK) and WhiteWave Foods (NYSE: WWAV). Those stocks combine for 11% of CSD’s weight. [Kraft Takeover Lifts Niche ETFs]
Guggenheim Spin-Off ETF