Historically spinoffs have been a dependable source of market beating investment ideas. Conventional wisdom says that spun-out entities have thrived when given the freedom to focus on their core products and services. At the same time, it’s hard for many investors to recognize the value of a division buried within the complex finances of an unwieldy conglomerate. After such an entity gets spun off, investors usually have an easier time valuing it more accurately. As a result, the sum of the parts of an entity ripe for spinoff can wind up exceeding the assessed value of the conglomerate in which they operate.
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