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Spin Gold From Spinoffs: A Portfolio Of 5 Castoffs Trounces The S&P 500

11/21/2017

14 Comments

 
I co-wrote an article in Forbes on a 5-stock investment strategy focused on spin-offs, or companies that have recently spun off from their parents. The Spinoff Portfolio is a “set it and forget it for a year” strategy that selects five young spinoffs on January 1st of each year. The full strategy rules are laid out at the end of the Forbes article.
 
For 2018, our algorithm has selected these 5 spinoffs:
  1. CSRA​
  2. Synchrony Financial
  3. GCP Applied Technologies
  4. Adient Plc
  5. Lamb Weston Holdings

Investing in The Spinoff Portfolio is simple. Just buy the 2018 constituents in early January, putting 20% of the pie in each of the five names. I’d suggest not putting more than 10%-20% of your net worth in this strategy. Like the Uber Cannibals and Shameless Cloning Portfolio, we set it and forget it (for a year). I will publish The Spinoff Portfolio for a particular year on my blog by January 1st each year. This strategy only makes sense if you intend to follow it for at least a decade or longer. The ideal home for this strategy is your IRA. That way, there are no realized gains to worry about.
 
You can view the article here:

https://www.forbes.com/sites/janetnovack/2017/11/21/spin-gold-from-spinoffs-a-portfolio-of-5-castoffs-trounces-the-sp-500/#25e3db5b3e44
 
I co-wrote the article with Jaya Bharath Velicherla, a talented quant at Dhandho Funds.
​
Enjoy!

Note, anyone who invests in any strategy needs to do their own research/due diligence and are themselves fully responsible for the outcome. 
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14 Comments
Shachar link
11/22/2017 12:05:29 am

Hi,
Does it make any difference if I'll buy those 5 companies now? or I'll wait until January?

Reply
Mohnish Pabrai
11/27/2017 07:07:41 pm

Thanks for your note. You do not have to wait until January 2, 2018 to start implementing the strategy and you can buy the 5 Spinoff stocks for 2018 now. It is hard to predict whether buying now or waiting until 1/2/18 will help or hurt, but if you want to start and are ready, you can go ahead. However, it is important to subsequently hold the 2018 stocks until January 2019.

Next year, the 2019 Spinoff stocks will become available prior to January 2019 and we'll publish them well in advance. Despite this, you should hold on to the 2018 picks until January 2019. If you are investing in a taxable account (and not an IRA), you should keep in mind short and long term gains/losses when choosing when to sell stocks in your Spinoff Portfolio. Sell winners so you realize long-term gains and sell losers so you realize short-term losses. So, Instead of editing the portfolio on the 365th day, you can edit on the 362 to 368th day to minimize taxes. All the best. Happy spinoff investing!

Reply
Shachar link
11/28/2017 08:46:08 am

Thanks Mohnish!
I've bought it
I've invested in Uber Cannibals and Shameless Cloning and they're the best picks in my portfolio

sunil
11/24/2017 02:02:46 am

How s&p500

Reply
sunil
11/24/2017 02:07:54 am

Sorry to interrupt. How S&P 500 investment turned 2.468 times in 18 years from 2000? This is about 5.15% return, I guess. For that to happen, S&P should be at 1000 in 2000, which it was not, unless I am missing something.

Reply
sunil
11/24/2017 02:27:56 am

You are right. You must have checked dividends reinvested. Thanks.

Reply
Praveen
5/5/2018 02:22:03 pm

Is it late to invest in this strategy or any other strategy you suggested like Uber Cannibals.

Thanks

Reply
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Bishop Gold Group link
8/15/2022 02:27:00 pm

I agree, by far Gold is still the best material investment you can have as of today. Cryptos and other digital commodities were in but I still belive that having something that you can hold for long time is still worth it.

Reply
Bishop Gold Group link
8/26/2022 09:29:38 pm

Thank you for sharing this awesome article that can be helpful on understanding how investing in the spinoff portfolio works.

Reply
Joshua Trotter link
9/2/2022 01:21:15 pm

This strategy only makes sense if you intend to follow it for at least a decade or longer. The ideal home for this strategy is your IRA. That way, there are no realized gains to worry about. I’m so thankful for your helpful post!

Reply
Brent Reynoso link
10/19/2022 03:20:56 pm

This strategy only makes sense if you intend to follow it for at least a decade or longer. The ideal home for this strategy is your IRA. Thank you for sharing your great post!

Reply



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    Mohnish Pabrai

    Mohnish Pabrai is the founder and Managing Partner of the
    Pabrai Investments Funds, the founder and CEO of
    Dhandho Funds, and the author of The Dhandho Investor and Mosaic. 

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