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3 Stock Spin-offs for 2022 with Insider Buying

Investing in stock spin-offs is one of the few ways that investors can beat the market. Here are 3 stock spin-offs for 2022 that look good.

Investing in stock spin-offs is one of the few ways that investors can beat the market. Spin-offs won’t outperform every year, but over the long term they tend to do quite well. Credit Suisse found that U.S. stock spin-offs outperformed the market by 13.4% in their first 12 months of trading.

Not surprisingly, many “superinvestors” invest in spin-offs regularly. Many great investors including Seth Klarman, Charlie Munger and Peter Lynch invest in spin-offs.

My favorite of these super investors is Joel Greenblatt. He wrote my favorite investing book, You Can Be a Stock Market Genius, which described the opportunity for individual investors to make serious money investing in stock spin-offs and other special situations.

Greenblatt ran Gotham Capital for a year and generated ~50% annual returns for a decade.

Here’s what Joel Greenblatt has to say about spin-offs.

“You can make a pile of money investing in spin-offs. The facts are overwhelming. Stocks of spin-off companies significantly and consistently outperform the market averages.”

As such, I closely follow the spin-off space. You can see some of my findings in my investment advisory, Cabot Micro-Cap Insider.

In the meantime, here are three stock spin-offs that look attractive into 2022 (all three have seen insider buying).


Stock Spin-off for 2022 #1: Jackson Financial (JXN)

Jackson is an annuity company that was spun out of U.K. insurance company, Prudential PLC (PUK).

It was a classic “Greenblatt” spin-off.

The spin-off was perceived to be the “bad company” because it was focused on annuities, an area of the market that has been challenging due to low interest rates.

Several other factors contributed to the company’s initial share sell off.

  1. There was a massive difference between the market cap of the parent ($55BN) and spin-off ($2.4BN).
  2. The distribution ratio was extreme (1:40).
  3. The parent is an international company and the spin-off is a U.S. company.
  4. The spin-off took place in two phases. U.K. investors received their stake on September 13 and immediately sold. U.S. investors received their stake on September 20.

Jackson recently reported Q3 earnings and has rallied 22%, but it still looks extremely attractive.

The company just declared a $0.50 quarterly dividend, which works out to an annual dividend yield of 5.2%. Further, it’s trading at 1.5x forward earnings, a big discount to Brighthouse Financial (BHF), which is trading at a 3.7x forward earnings and doesn’t pay a dividend. Jackson’s other peer, Equitable Holdings (EQH), trades at 4.8x forward earnings and a dividend yield of 2.3%.

Finally, we recently saw insider buying, which is always a plus.

Stock Spin-off for 2022 #2: Orion Office REIT (ORN)

Orion is another perceived “bad company” spin-off.

It was formed when VEREIT and Realty Income merged and spun off their office portfolio into the new company, Orion Office REIT.

Given the “work from home” trend which has accelerated since the onset of the pandemic, investors aren’t lining up to invest in REITs that are focused on office space. Nonetheless, Orion looks attractive as its offices are in the suburbs and many companies are establishing offices outside of cities to encourage workers to come back to the office with shorter commutes.

From a valuation perspective, the stock looks attractive too, trading at 11x forward EBITDA compared to peers at 16.2x EBITDA. Even better, Orion is likely to declare a dividend which will be a catalyst to re-rate shares higher. We also saw recent insider buying, which usually bodes well.

Stock Spin-off for 2022 #3: Sylvamo (SLVM)

In October, International Paper (IP) spun off Sylvamo (SLVM), its printing paper business.

Paper usage is in secular decline given increases in digital media and paperless communication. Nonetheless the paper business is a large market and Sylvamo is well positioned in it as a low-cost provider.

In addition, the company is experiencing a cyclical recovery as people come back to the office and are consuming significant quantities of paper. Sales were up 23% y/y in the third quarter and year to date the company has generated $325MM in free cash flow (market cap is $1.4 billion).

Finally, it’s trading at 4.6x 2022 EBITDA, a discount to peers at 5.8x and will likely declare a dividend in 2022 once it has de-levered. And as with the other two, the insiders have been buying.

Do you have a stock spin-off that you like for 2022? Share it in the comments below.


Rich is a trained economist and Chartered Financial Analyst (CFA). He has researched and invested in stocks for more than 20 years and has become a recognized expert in micro-cap stock investing. He started his career at investment advisory firm Eaton Vance where he covered a wide range of sectors including software and internet, financials, and health care.